what is an overhead ratio 
an overhead ratio is a measurement of the operating costs of doing business compared to the company s income a low overhead ratio indicates that a company is minimizing business expenses that are not directly related to production the formula for the overhead ratio isthe overhead ratio is arrived at by dividing operating expenses by the sum of taxable net interest income and operating income that is overhead ratio operating expenses tii operating income where tii taxable interest income begin aligned text overhead ratio frac text operating expenses text tii text operating income textbf where text tii text taxable interest income end aligned overhead ratio tii operating incomeoperating expenses where tii taxable interest income the basics of overhead ratiosa company s overhead expenses are the costs that result from its normal day to day business operations operating expenses might include office rent advertising utilities insurance depreciation or machinery calculations of overhead exclude costs that are directly related to the production of the goods or services that the company produces thus in a toy factory the skilled workers who make the toys and the tools they use to create them are not overhead expenses but employees of the marketing department and the promotional materials they produce are overhead costs 