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Jaws Ratio

The Jaws Ratio is a financial metric used by banks and other financial institutions to measure the difference between the growth rate of income and expenses. It is typically expressed as a percentage. A positive Jaws Ratio occurs when income grows faster than expenses, indicating improved profitability.

Example

If a bank's income grows by 10% while its expenses increase by only 5%, the Jaws Ratio is positive, signaling stronger profitability.

Key points

• Measures the difference between the growth rate of income and expenses.

• A positive Jaws Ratio indicates improving profitability, while a negative ratio suggests inefficiency.

• Commonly used in the financial industry to assess operational efficiency.

Quick Answers to Curious Questions

It indicates that the bank’s income is growing faster than its expenses, leading to increased profitability.

A negative Jaws Ratio signals that expenses are outpacing income growth, which can lead to declining profitability and potential operational issues.

It helps banks and financial institutions assess their efficiency in managing income and expenses, providing insights into profitability trends.

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