|
The efficiency ratio of a business is sometimes simply expenses divided by revenue. It's the "inversed" operating margin since the operating margin is
(revenue - expenses) / revenue
and the efficiency ratio is
expenses / revenue
Example
Citigroup, Inc. 2003:
- Revenues, net of interest expense: 77,442
- Operating expenses: 39,168
expenses / revenue
39,168/77,442=0.51
The efficiency ratio is 0.51. Or the other way
revenue / expenses
77,442/39,168=1.98
The "operating leverage" is 1.98.
Alternative
If "benefits, claims, and credit losses" is added to operating expenses the ratio get worse.
51109/77,442=0.66
Alternative
If it's calculated as revenue divided by expenses (interest expense, "benefits, claims, and credit losses", operating expenses) it becomes 1 less the "income from continuing operations" margin.
68,380/94,713=0.72
See also
External links
Example
|
