Operating ratio
Also called OR
Operating ratio is operating expenses divided by operating revenue, expressed as a percentage, where a lower number means more of each dollar earned is kept.
Last reviewed · by the Fleetchart team
An operating ratio of 95 means ninety-five cents of every revenue dollar went to running the business and five cents remained. It is the standard efficiency measure across the industry because it is comparable between operations of very different sizes.
For a small carrier it is most useful as a trend. A ratio drifting upward month over month means costs are growing faster than revenue, which is visible long before it shows up in the bank balance.
It says nothing about whether the owner is being paid properly, so it should be read alongside cost per mile computed with owner compensation included.
For example, say a truck brings in $20,000 in a month and costs $18,600 to run. The operating ratio is $18,600 ÷ $20,000 = 0.93, or 93. The business kept $20,000 − $18,600 = $1,400, which is seven cents of every dollar. If the next month brings in the same $20,000 but costs rise to $19,400, the ratio climbs to 97 and only $600 is left.
That is the same revenue with less than half the money kept. Watching the ratio each month shows that slide while there is still time to fix it.