ECR and Operating ratio. What is ECR? It shows how much expenditure is covered by the revenue earned...
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Transcript of ECR and Operating ratio. What is ECR? It shows how much expenditure is covered by the revenue earned...
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/stationery 100%
Postage in cash, unpaid article amount, franking machine amount
100%
Money order commission 100%
IPO commission 100%
Telephone bill Total no of bills collected x Rs.5/-
GEB Total no of bills collected x Rs. 5/-
SB account Rs.175.46per live account yearly
SB account Rs.26.61 per silent account yearly
KVP/NSC certificate Total No of certificate(issue/Discharge) x59.95
IVP certificate Total No of certificate (Discharge) x 15.88
PLI 7% of premium collected
RPLI 10% of premium collected
Railway/telecom pensioners Rs. 80/- per payment
EPF pensioners Rs. 53.6 per payment
Total income of the Post office:
How to calculate ECR?
How to calculate ECR?
IMTS Rs. 260 per transaction
Post box/post bag rent 100 %
Post office quarter rent 100%
Advertisement income 100%
Exam fee income 100%
MO/VPMO from /sale of AD income 100%
Issue of identity card 100%
Sale of old records 100%
Speed post revenue 100%
Sale of gold coin 4% of Total amount Sold
Judicial/non judicial stamp 3% of Total purchase (for HO only)
Sheetal alovera sale 30% 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 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.
Figure of more than 100(ECR )means a profitable state of business
Operating Ratio
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 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