Cost/income ratio

The cost/income ratio is

operating expenses ÷operating income

The cost/income ratio is an efficiency measure similar to operating margin. Unlike the operating margin, lower is better. The cost income ratio is most commonly used in the financial sector.

It is useful to measure how costs are changing compared to income - for example, if a bank's interest income is rising but costs are rising at a higher rate looking at changes in this ratio will highlight the fact.

The cost/income ratio reflects changes in the cost/assets ratio and in interest margin