Business Efficiency

The efficiency ratio indicates the expenses as a percentage of revenue (expenses / revenue), with a few variations - it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizing efficiency ratios (reducing expenses and increasing earnings). The concept typically applies to banks. It relates to operating leverage, which measures the ratio between fixed costs and variable costs.


Efficiency = input / output[]

If expenses are $60 and revenue is $80 (perhaps net of interest revenue/expense) the efficiency ratio is 0.75 or 75% (60/80) - meaning that $0.75 are spent for every dollar earned in revenue.

An example

Citigroup, Inc. (2003):

  • Revenues, net of interest expense: 77,442[1]
  • Operating expenses: 39,168[2]

That makes the efficiency ratio = 39,168/77,442 = 0.51 or 51%.

If "benefits, claims, and credit losses", for 11,941, are added to operating expenses, the efficiency ratio worsens to 51,109/77,442 = 0.66

See also


  1. ^ Citigroup 10K
  2. ^ Citigroup 10K

External links


  This article uses material from the Wikipedia page available here. It is released under the Creative Commons Attribution-Share-Alike License 3.0.



Connect with defaultLogic
What We've Done
Led Digital Marketing Efforts of Top 500 e-Retailers.
Worked with Top Brands at Leading Agencies.
Successfully Managed Over $50 million in Digital Ad Spend.
Developed Strategies and Processes that Enabled Brands to Grow During an Economic Downturn.
Taught Advanced Internet Marketing Strategies at the graduate level.

Manage research, learning and skills at Create an account using LinkedIn to manage and organize your omni-channel knowledge. is like a shopping cart for information -- helping you to save, discuss and share.

  Contact Us