Working Ratio

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DEFINITION of 'Working Ratio'

A ratio used to measure a company's ability to recover operating costs from annual revenue. This ratio is calculated by taking the company's total annual expenses (excluding depreciation and debt-related expenses) and dividing it by the annual gross income:

Working Ratio

INVESTOPEDIA EXPLAINS 'Working Ratio'

A working ratio below 1 implies that the company is able to recover operating costs, whereas a ratio above 1 reflects the company's inability to do so.

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