Operating Expense Ratio (OER)

Operating expenses are costs associated with running a business's core operations on a daily basis. Thus, the lower a company's operating expenses are, the more profitable it generally is. Over time, changes in the OER indicate whether the company can increase sales without increasing operating expenses proportionately (i.e., if the business is scalable). In real estate, companies can compare properties by using the ratio.

As such, the OER is also a measure of managerial flexibility and competency that makes companies easier to compare. However, it is important to note that some industries have higher OERs than others. This is why comparing OERs is generally most meaningful among companies within the same industry, and the definition of "high" or "low" expenses should be made within this context.