The Efficiency Ratio is a financial metric used to assess how effectively a company utilizes its resources to generate revenue. It is calculated by dividing operating expenses by total revenue. A lower efficiency ratio indicates better performance, as it means the company is spending less to earn more. This ratio is particularly important for industries like banking and finance, where operational efficiency can significantly impact profitability. By monitoring the Efficiency Ratio, companies can identify areas for improvement and make informed decisions to enhance their overall performance and competitiveness in the market.