The efficiency ratio measures:
A) a bank's ability to control interest expense.
B) a bank's ability to control non-interest expense.
C) a bank's spread.
D) a bank's burden.
E) a bank's operating leverage.

Question

Quizplus · Accepted Answer

The efficiency ratio measures a bank's ability to control non-interest expense, which is why option B is the correct choice. Option A is not correct as it only focuses on interest expense, whereas the efficiency ratio is a broader measure. Option C is not correct as the bank's spread is a different concept, which refers to the difference between the interest earned and the interest paid. Option D is also incorrect as it is not a commonly used financial term. Option E is not correct as it refers to a bank's operating leverage, which is a different concept altogether.

The Efficiency Ratio Measures