Operational Efficiency Ratio (OER) is a key performance indicator used to assess a business’s ability to generate profit from its operations. It measures how well a company can use the resources at its disposal to turn sales into actual profits. OER is calculated by dividing operating expenses by total revenue for a given period. A high OER shows that a company is able to generate more profits with every dollar of revenue, while a low OER indicates that the company needs to improve its operational efficiency in order to increase profitability. Companies that have a high OER tend to be more successful and efficient than those with a lower ratio, making it an important metric to consider when gauging the success of any business.
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