Cost-to-Income Ratio
The Cost-to-Income Ratio is a financial metric used to assess a company's efficiency. It is calculated by dividing operating expenses by operating income. A lower ratio indicates better efficiency, meaning the company spends less to generate income. This ratio is particularly important in the banking and finance sectors, where managing costs is crucial for profitability.
Investors and analysts often use the Cost-to-Income Ratio to compare companies within the same industry. A high ratio may signal potential issues with cost management, while a low ratio suggests effective control over expenses. Understanding this ratio helps stakeholders make informed decisions about a company's financial health.