This ratio is a measure a company's efficiency and generally identified with or used by banks and financial institututions to indicate the ability of the management to keep the overheads low. It is also referred to "Overhead Efficiency Ratio". This ratio is computed by different banks in different manner. One of the following formulas is used to compute this ratio.

The lower the ratio, the better it is in terms of efficiency of the company. Lower ratio indicates that a lower percentage of income is utilized for meeting overhead expenses. It measures how efficiently the bank or financial institution is operating.

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