What term is used when a water utility divides its total operating expenses into the total revenue?

The term used when a water utility divides its total operating expenses into the total revenue is known as the operating ratio. This ratio provides insight into the efficiency of the utility in managing its operational costs relative to the revenue it generates. A lower operating ratio indicates that a smaller portion of revenue is consumed by operating expenses, which typically signifies better operational performance and financial health.

In the context of water utilities, understanding the operating ratio is crucial as it helps gauge profitability and operational efficiency. A high operating ratio can signal inefficiencies or higher costs relative to revenue, which may require corrective actions to optimize operations and ensure sustainability. This financial metric is a vital tool in the management and planning of water utilities, influencing decisions on budgeting, pricing, and resource allocation.