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Efficiency ratio calculation
Calculating and Interpreting the Efficiency Ratio: A Practical Example
November 15, 2023
Can you provide an example of how the Efficiency Ratio is calculated and interpreted?
The Efficiency Ratio is calculated by dividing operating expenses by the sum of average total assets. For instance, if operating expenses are $500,000 and average total assets are $2,000,000, the Efficiency Ratio would be 25%. A lower ratio indicates more efficient asset utilization.
Tags : Efficiency Ratio Calculation , Financial Analysis