OPERATING EXPENSE TO SALES Definition

OPERATING EXPENSE TO SALES reports the operating expenses as a percent of Net Revenues. This then is a measure of the total overhead employed in the firm per Net Sales Revenue Dollar; thereby giving an indication of the efficiency of the cost structure of the company. It gives an indication of the ability of a business to convert income into profit. Generally, businesses with low ratios will generate more profit than others. In general business operations with larger and more stable cash flows can sustain higher ratios than smaller and less stable operations. Scale and income stability are important considerations though it is up to the management of a business to monitor costs in an appropriate manner whatever its size. Formula: Total Overhead Cash Expense / Net Revenues

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SAS see STATEMENTS OF AUDITING STANDARDS.

OVERTRADING, in securities, is: a. excessive buying and selling by a broker in a discretionary account, or, b. practice of a member of an underwriting group inducing a brokerage client to buy a portion of a new issue by purchasing other securities from the client at a premium. In finance, it is when a firm expands sales beyond a level that can be financed with normal working capital.

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