Operating ratio (OR) strips out financing and taxes and asks a single question: does moving freight, by itself, make money? Revenue is what you bill for transportation and accessorials; operating expenses are everything it takes to produce that — driver pay, fuel, maintenance, insurance, dispatch, tolls, and administrative overhead.
An OR of 100% is breakeven on operations. Every point below that is operating profit as a share of revenue; every point above is an operating loss. A carrier at 96% is keeping four cents of every revenue dollar before debt service and taxes.
Small carriers can run a lower OR than large ones in good markets because overhead is thinner, but they also swing harder when rates fall, because a bigger share of their revenue rides the spot market. Watching OR month to month shows whether a soft patch is a temporary rate dip or a structural cost problem.
Improving OR is either a revenue problem (weak lanes, uncollected accessorials, too much deadhead) or a cost problem (fuel, maintenance surprises, insurance, idle overhead). Calculating cost per mile alongside OR tells you which one to work on.
Terms in this answer: Accessorial Charge, Linehaul