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## Efficiency Ratio

Here,n=Non-Interest Expense,r=Revenue

## $\frac{n}{r}$

The efficiency ratio, a ratio that typically applies to banks, in simple terms is defined as expenses as a percentage of revenue (expenses / revenue), with a few variations. A lower percentage is better since that means expenses are low and earnings are high. It relates to operating leverage, which measures the ratio between fixed costs and variable costs.

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