Video Lesson on Operating Ratio

O.R. - Operating Ratio - Practical -2012 year Question paper

Operating Ratio  (O.R) - Practical problem - 20 marks  - Compulsory

2012 year optional Books & Budget (without Books) Question paper

1. Given below are the financial results of Railways for the years 2007-08 and 2008-09.

                                                Figures in Crores of Rs.

Particulars	2007-08	2008-09
Gross Earnings	71645	79837
Traffic Suspense	75	25
Gross Traffic Receipts	71720	79862
Miscellaneous Receipts	1557	1797
Ordinary Working Expenses-OWE	41033	54349
Appropriation to DRF	5450	7000
Appropriation to Pension Fund	7979	10490
Miscellaneous Expenditure	480	645
Net Revenue	18334	9174
Dividend Paid	4903	4718

a) From the above figures, calculate the Operating Ratio for 2007-08 and 2008-09.

b) Comment on performance of the railway in 2008-09 compared to 2007-08, giving possible reasons for improvement /deterioration.  Calculate the amount available for sourcing of capital expenditure in each year and how is it normally allocated.

Ready reckoner for calculation of Operating Ratio

SN	Particulars	formulae	Amount		SN	Particulars	formulae	Amount	Finding
1.	Coaching Earnings (less refunds)				10	OWE - Ordinary Working Expenses
2.	Goods Earnings (less refunds)				11	Appropriation to DRF
3	Traffic Earnings	(1 + 2)			12	Appropriation to Pension Fund
4	Sundry Other Earnings (less refunds)
5	Gross Earnings	(3 + 4)			13	Gross Working Expenses	(10 + 11 + 12)		O.R = 13/5 x 100
6	Suspense				14	Suspense
7	Gross Receipts	(5 + 6)			15	Gross Expenditure	(13 + 14)
8	Miscellaneous Receipts				16	Miscellaneous Expenditure
9	Total Revenue Receipts	(7 + 8)			17	Total Revenue Expenditure	(15 + 16)		Net Revenue  = 9 - 17

Surplus = Net Revenue minus Dividends paid.  (Shortfall if the figure is negative)

Answer

                                                                  2007-08 year

SN	Particulars	formulae	Amount		SN	Particulars	formulae	Amount
1.	Coaching Earnings (less refunds)				10	OWE - Ordinary Working Expenses		41033
2.	Goods Earnings (less refunds)				11	Appropriation to DRF		5450
3	Traffic Earnings	(1 + 2)			12	Appropriation to Pension Fund		7979
4	Sundry Other Earnings (less refunds)
5	Gross Earnings	(3 + 4)	71645		13	Gross Working Expenses	(10 + 11 + 12)	54462	O.R = 13/5 x 100 = 76.02 %
6	Suspense		75		14	Suspense		0
7	Gross Receipts	(5 + 6)	71720		15	Gross Expenditure	(13 + 14)	54462
8	Miscellaneous Receipts		1557		16	Miscellaneous Expenditure		480
9	Total Revenue Receipts	(7 + 8)	73277		17	Total Revenue Expenditure	(15 + 16)	54942	Net Revenue  = 9 - 17 = 18335

Surplus = Net Revenue minus Dividends paid.  (Shortfall if the figure is negative)

surplus = 18335 - 4903 = 13432

                                                            2008-09 year

SN	Particulars	formulae	Amount		SN	Particulars	formulae	Amount
1.	Coaching Earnings (less refunds)				10	OWE - Ordinary Working Expenses		54349
2.	Goods Earnings (less refunds)				11	Appropriation to DRF		7000
3	Traffic Earnings	(1 + 2)			12	Appropriation to Pension Fund		10490
4	Sundry Other Earnings (less refunds)
5	Gross Earnings	(3 + 4)	79837		13	Gross Working Expenses	(10 + 11 + 12)	71839	O.R = 13/5 x 100 =89.98 %
6	Suspense		25		14	Suspense		0
7	Gross Receipts	(5 + 6)	79862		15	Gross Expenditure	(13 + 14)	71839
8	Miscellaneous Receipts		1797		16	Miscellaneous Expenditure		645
9	Total Revenue Receipts	(7 + 8)	81659		17	Total Revenue Expenditure	(15 + 16)	72484	Net Revenue  = 9 - 17 = 9175

Surplus = Net Revenue minus Dividends paid.  (Shortfall if the figure is negative)

surplus = 9175 - 4718 = 4457

Answers:

1 ) Operating Ratio for year 2007-08 is 76.02 % and for year 2008-09 is 89.98 %

2) i) Possible reasons for deterioration:  11% increase in Earnings is not sufficient to offset the increase of 30 % (average) in OWE, Appropriation to DRF & Pension Fund.  The reason for big jump on expenditure side is attributed to implementation of VI Pay commission w.e.f. 01.01.2006, but implemented in the financial year 2008-09 with retrospective effect.

  ii) Amount available for sourcing of capital expenditure.  -  There is no clear cut rule for distribution of surplus among different funds.  After meeting the requirements of Development Fund, the left over will be allocated to Capital Fund for incurring of capital expenditure. ( to avoid Dividend liability)

year	Surplus	Development Fund	Capital Fund	Remarks
2007-08	13432	1500	11932	Notional distribution
2008-09	4457	1391	3066	Actual distribution ( as per website of Railways)

Operating Ratio Numerical Problem - Appendix3 Exam - One time Special 2022 year

 

Ready reckoner for calculation of Operating Ratio

SN	Particulars	formulae	Amount		SN	Particulars	formulae	Amount
1.	Coaching Earnings (less refunds)	(60000+5000)	65000		1.	OWE - Ordinary Working Expenses		150000
2.	Goods Earnings (less refunds)		125000		2.	Appropriation to DRF		5000
3	Sundry Other Earnings (less refunds)		10000		3	Appropriation to Pension Fund		40000
4	Gross Earnings	(1+2+3)	200000		4	Gross Working Expenses	(1+2+3)	195000	O.R = GWE/GE x 100 = 195000/200000 x 100 = 97.5 %
5	Suspense (Traffic & DR)		(-) 300		5	Suspense (DP)		(-) 400
6	Gross Receipts	(4+5))	199700		6	Gross Expenditure	(4+5))	194600
7	Miscellaneous Receipts		500		7	Miscellaneous Expenditure		2000
8	Total Revenue Receipts	(6+7))	200200		8	Total Revenue Expenditure	(6+7)	196600	Net Revenue/Net Receipts/Surplus  = TRR – TRE = 3600

 

1. Traffic Suspense -  (-) 300

2. Total Revenue Receipts - 200200

3. Gross Expenditure  - 194600

4. Operating Ratio  - 97.5 %

5. Surplus - 3600