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

The term that is used when a water utility divides its total operating expenses by total revenue is known as the operating ratio. This ratio is a crucial financial metric for utilities, as it provides insight into the efficiency of the operation. A lower operating ratio indicates that a greater portion of the revenue is available to cover costs, which can be beneficial for the utility's financial health and sustainability.

In the context of water utilities, the operating ratio helps to assess how well the utility is managing its expenses in relation to its revenue. It reflects the ability to maintain service levels while controlling costs. If the ratio is too high, it could indicate potential financial difficulties, which may prompt the utility to evaluate its operations, costs, or pricing structure.

The other terms listed do not accurately describe this financial relationship. The revenue index typically relates to measuring the deviation of revenue from a baseline or budget, while expense allocation refers to the process of categorizing specific costs to particular services or departments within the operation. Cost ratio is a more general term that might not specify the same financial analysis as the operating ratio does. Thus, the usage of the term operating ratio is appropriate in this context.