What Is Cost/income Ratio?

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Cost/income ratio shows a company's expenses in conjunction with its income, according to MoneyWeek. This is done by dividing the operating costs, which includes such items as salaries and property expenses, by the operation income. Negative debts that have been written off the books should not be included.

MoneyWeek notes that cost/income ratio gives a clear view of how the company is being managed, and it is an important way of determining a bank's value. A low ratio means the company is in good standing, and any change means underlying problems. For example, if the ratio increases from one calculation to the next, costs are soaring above income levels. This means that a company needs to seek more business ventures to boost income.