a farm business has an operating expense ratio of 60%, a depreciation expense ratio of 20%, and an interest…

a farm business has an operating expense ratio of 60%, a depreciation expense ratio of 20%, and an interest expense ratio of 10%. what is the businesss net farm income ratio (operating income ratio)?

a farm business has an operating expense ratio of 60%, a depreciation expense ratio of 20%, and an interest expense ratio of 10%. what is the businesss net farm income ratio (operating income ratio)?

Answer

Explanation:

Step1: Recall income - expense relationship

The total of all expense ratios and the net farm income ratio should equal 100% (or 1 in decimal form). Let the net farm income ratio be $x$.

Step2: Set up the equation

We know that the operating expense ratio is 60% (or 0.6), the depreciation expense ratio is 20% (or 0.2), and the interest expense ratio is 10% (or 0.1). So, $0.6 + 0.2+0.1 + x=1$.

Step3: Solve for $x$

First, add the known expense ratios: $0.6 + 0.2+0.1=0.9$. Then, $x = 1 - 0.9$. So, $x = 0.1$ or 10%.

Answer:

10%