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Analysis of the enterprise > Expense ratios - Pg. 156

accounts demystified operating profit is what we have left after paying the oper- Since ating expenses, it obviously makes sense to analyse the operating expenses and see if there is anything we can learn. capital employed in a business is made up of both fixed assets The and working capital. Working capital is, in turn, made up of vari- ous different elements. We can therefore analyse each of these different elements. In the same way that we looked at how many sales we got for each pound of assets and how much profit we got for each pound of sales, we will analyse all the expenses and the constituents of capital employed in rela- tion to sales. Expense ratios The P&L lists three types of expense: cost of goods sold, distribution and