The correct answer is: Neither 1 nor 2.
Operating ratio is a measure of a company’s efficiency. It is calculated by dividing the company’s operating expenses by its operating revenue. A lower operating ratio indicates that a company is more efficient in its operations.
The operating ratio of Indian Railways is high. This is because Indian Railways is a government-run organization and is required to provide a number of social services, such as free travel for certain categories of people, at a loss. These social service obligations imposed in Budget increase the operating expenses of Indian Railways and hence its operating ratio.
A high operating ratio does not necessarily mean that the condition of Indian Railways is bad. It simply means that Indian Railways is not as efficient as it could be in its operations. However, the fact that Indian Railways is required to provide a number of social services at a loss is a major factor in its high operating ratio.
Here is a brief explanation of each option:
- Option A: The higher the operating ratio of Indian Railways the better is the condition of Indian Railways.
This statement is incorrect. A high operating ratio does not necessarily mean that the condition of Indian Railways is good. It simply means that Indian Railways is not as efficient as it could be in its operations.
- Option B: Operating ratio of Indian Railways is high on account of social service obligation imposed in Budget.
This statement is correct. Indian Railways is a government-run organization and is required to provide a number of social services, such as free travel for certain categories of people, at a loss. These social service obligations imposed in Budget increase the operating expenses of Indian Railways and hence its operating ratio.
- Option C: Both 1 & 2
This statement is incorrect. Option A is incorrect and Option B is correct.
- Option D: Neither 1 nor 2
This statement is correct. Option A is incorrect and Option B is correct.