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Overhead Ratio Calculator

Enter operating expenses, revenue and other operating income to get the overhead ratio.

How it is calculated

The tool divides running costs by total operating income: overhead ratio = opex / (revenue + other income) × 100. opex is operating expenses for the period, revenue is sales or main income, and other income is any additional operating income; if you leave it empty it counts as 0. All amounts must be in the same currency and covering the same period. Opex and other income cannot be negative, and revenue plus other income must be above zero, otherwise there is no result. The answer is a percentage with two decimals. A lower figure means less income is eaten by overhead. The tool does not tell you which costs belong in operating expenses; deciding that, for example whether depreciation is included, is your responsibility.

Worked example

A business has operating expenses of 420000, revenue of 900000 and other operating income of 60000. Total income: 900000 + 60000 = 960000. Ratio: 420000 / 960000 = 0.4375, i.e. 43.75%. Roughly 44 cents of each unit earned goes to overhead. Without the 60000 of other income, the figure would be 420000 / 900000 = 46.67%.

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Common mistakes

  • Including cost of goods sold or interest in opex when the ratio you compare against excludes them. Use the same definition as the benchmark.
  • Dividing by revenue only and forgetting other operating income, which gives a higher ratio than this formula.
  • Mixing periods, for instance full-year opex with a single quarter of revenue.
  • Entering the cost as a negative number because it is shown in brackets in the accounts. Negative values are rejected.
  • Comparing a bank ratio with a retailer's. Banks use non-interest expense over total income, and normal ranges differ widely by sector.

Sources

About this calculator

This calculator computes the overhead ratio, operating expenses ÷ (revenue + other operating income), showing what share of a company's income gets absorbed by running costs before anything else — a lower ratio means more of each dollar earned flows through to profit rather than overhead.

It's most closely associated with banks, where it's calculated as non-interest expense ÷ (net interest income + non-interest income) and is watched as a core efficiency benchmark — a rising overhead ratio over several quarters is often one of the first signs analysts flag that a bank's cost discipline is slipping.

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Comments (1)

  • Editorial team

    For a bank, the usual mapping is non-interest expense as operating expenses, net interest income as revenue and non-interest income as other income. The tool simply divides by the sum of the last two. A reading above 100% means operating costs exceed that income. For a business with seasonal sales, use a full year, since fixed costs spread over a weak quarter make the ratio jump. Which cost lines do you count as overhead in your comparisons?

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