What Is the Operating Ratio? The operating ratio shows the efficiency of a company’s management by comparing the total operating expense (OPEX) of a company to net sales. The operating ratio shows how efficient a company’s management is at keeping costs low while generating revenue or sales. The smaller the ratio, the more efficient the
What Is Operating Revenue? Operating revenue is the revenue that a company generates from its primary business activities. For example, a retailer produces its operating revenue through merchandise sales; a physician derives their operating revenue from the medical services that they provide. What constitutes operating revenue varies based on the business or the industry. Key
What Is Operational Risk? Operational risk summarizes the uncertainties and hazards a company faces when it attempts to do its day-to-day business activities within a given field or industry. A type of business risk, it can result from breakdowns in internal procedures, people and systems—as opposed to problems incurred from external forces, such as political
What Is Operational Efficiency? Operational efficiency is primarily a metric that measures the efficiency of profit earned as a function of operating costs. The greater the operational efficiency, the more profitable a firm or investment is. This is because the entity is able to generate greater income or returns for the same or lower cost than
What Is Operations Management (OM)? Operations management (OM) is the administration of business practices to create the highest level of efficiency possible within an organization. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization. Operations management teams attempt to balance costs
What Is Opinion of Title? The opinion of title is the legal opinion which attests to the validity of the title deed to a parcel of property. The opinion is sometimes issued in conjunction with an insuring title agency. Breaking Down Opinion of Title Opinions of title are usually issued by attorneys. Title companies use the
What Is Opinion Shopping? Opinion shopping is the practice of searching for an outside auditor willing to provide a favorable view of a company’s financial condition. Securing a positive assessment, known as an unqualified opinion, leads the public to believe that the company’s financials are fairly presented and conform to generally accepted accounting principles (GAAP)
What Is Opportunity Cost? Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. Because opportunity costs are unseen by definition, they can be easily overlooked. Understanding the potential missed opportunities when a business or individual chooses one investment over another allows for better
What Is the Options Price Reporting Authority (OPRA)? The Options Price Reporting Authority (OPRA) is a committee of representatives from participating securities exchanges responsible for providing last-sale options quotations and information from the participating exchanges. Serving as a national market system plan, OPRA oversees the process by which participants exchange, consolidate and disseminate market data.
What Is Optimal Capital Structure? The optimal capital structure of a firm is the best mix of debt and equity financing that maximizes a company’s market value while minimizing its cost of capital. In theory, debt financing offers the lowest cost of capital due to its tax deductibility. However, too much debt increases the financial
