ECR and Operating ratio. What is ECR? It shows how much expenditure is covered by the revenue earned by that unit Value can be less than 100 or more than.

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Presentation transcript:

ECR and Operating ratio

What is ECR? It shows how much expenditure is covered by the revenue earned by that unit Value can be less than 100 or more than 100 If <100: revenue is less than expenditure. (Loss) If >100: revenue is more than expenditure (Profit)

Why needed? Is a measure of profitability or loss If each unit earns as much as it spends, deficit can be wiped out Puts focus on unit level profitability Helps sensitize staff towards earning potential of each office.

Financial Management - Objectives To achieve the ideal operating ratio/ Expense Coverage Ratio:- ◦By controlling/minimizing the revenue expenditure, ◦By achieving revenue targets and preventing the Revenue pilferages, ◦By maximizing the revenue collections/ recoveries from other organizations for the services rendered to them, ◦By properly implementing the opportunities of new schemes/services introduced from time to time.

How to calculate ECR? Sale of postage stamps/stationery100% Postage in cash, unpaid article amount, franking machine amount 100% Money order commission100% IPO commission100% Telephone billTotal no of bills collected x Rs.5/- GEBTotal no of bills collected x Rs. 5/- SB accountRs per live account yearly SB accountRs per silent account yearly KVP/NSC certificateTotal No of certificate(issue/Discharge) x59.95 IVP certificateTotal No of certificate (Discharge) x PLI7% of premium collected RPLI10% of premium collected Railway/telecom pensionersRs. 80/- per payment EPF pensionersRs per payment Total income of the Post office: How to calculate ECR?

IMTSRs. 260 per transaction Post box/post bag rent100 % Post office quarter rent100% Advertisement income100% Exam fee income100% MO/VPMO from /sale of AD income100% Issue of identity card100% Sale of old records100% Speed post revenue100% Sale of gold coin4% of Total amount Sold Judicial/non judicial stamp3% of Total purchase (for HO only) Sheetal alovera sale30% of Total sale Any other income which are not included above 100% Total income of the Post office: Cont…. How to calculate ECR?

Expense Coverage Ratio ECRNet Revenue receipt x 100 ECR = Net Revenue receipt x 100 Net Working Expenses Where : Net Revenue receipts = Gross Revenue receipts (-) Refunds; and Net working expenditure = Gross working expenditure less depreciation and recoveries. ECR Figure of more than 100(ECR )means a profitable state of business

Operating Ratio Operating RatioNet Expenditure Operating Ratio = Net Expenditure Net Revenue Where : Net Revenue receipts = Gross Revenue receipts (-) Refunds; and Net working expenditure = Gross working expenditure less depreciation and recoveries. Operating Ratio Operating Ratio of less than 1 indicates profitable state of business.

Exercise Calculate the ECR for your office with the help of information brought by you.

Thank You