overhead ratio

Definition

Operating expenses divided by the sum of taxable equivalent net interest income and other operating income. This ratio shows the proportion of expenses, in relation to total income, that cannot be allocated directly to production of the good or service. Operating expenses include items such as office rent, maintenance of machinery, depreciation costs, etc. In general, companies want to minimize these costs since it is difficult to quantify the revenues generated by undertaking these costs.

Use overhead ratio in a sentence

I needed to figure our the overhead ratio and I did not know how, so I had my brother do it for me.

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Our company had a very high overhead ratio because we had a lot of people who worked for us and we needed to pay salaries for them no matter what.

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OVERHEAD RATIO Operating expenses divided by the sum of taxable equivalent net interest income and other operating income. This ratio shows the proportion of expenses, in relation to total income, that cannot be allocated directly to production of the good or service.

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