How to calculate a cost-to-income ratio

Written by carter mcbride | 13/05/2017
How to calculate a cost-to-income ratio
Divide the company's operating costs by its operating income. (Calculator image by Alhazm Salemi from

Cost-to-income ratio equals a company's operating costs divided by its operating income. The cost-to-income ratio shows the efficiency of a firm in minimising costs while increasing profits. The lower the cost-to-income ratio, the more efficient the firm is running. The higher the ratio, the less efficient management is at reducing costs.

Determine a firm's operating costs. Operating costs are those which are directly related to running the firm, such as salaries and administrative expenses. For example, Firm A has £325,000 of operating expenses each month.

Determine the firm's operating income. Firms disclose operating incomes on their income statements. Operating incomes are cash inflows from the firm's operation. In the example, a firm has operating income of £585,000 each month.

Divide the firm's operating expenses by the firm's operating income. In the example, £325,000 divided by £585,000 equals Firm A's cost to income ratio of 0.555.

  • All types
  • Articles
  • Slideshows
  • Videos
  • Most relevant
  • Most popular
  • Most recent

No articles available

No slideshows available

No videos available

By using the site, you consent to the use of cookies. For more information, please see our Cookie policy.