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.
Citigroup, Inc. (2003):
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
Manage research, learning and skills at defaultLogic. Create an account using LinkedIn or facebook to manage and organize your Digital Marketing and Technology knowledge. defaultLogic works like a shopping cart for information -- helping you to save, discuss and share.Visit defaultLogic's partner sites below: