Enter the operating expenses ($) and the total revenue ($) into the calculator to determine the Operational Efficiency. 

Operational Efficiency Formula

The following formula is used to calculate the Operational Efficiency. 

Eop = OE / TR
  • Where Eop is the Operational Efficiency
  • OE is the operating expenses ($) 
  • TR is the total revenue ($) 

To calculate the operational efficiency, divide the operating expenses by the total revenue.

How to Calculate Operational Efficiency?

The following two example problems outline how to calculate the Operational Efficiency.

Example Problem #1:

  1. First, determine the operating expenses ($). In this example, the operating expenses ($) is given as 4000.
  2. Next, determine the total revenue ($). For this problem, the total revenue ($) is given as 9000.
  3. Finally, calculate the Operational Efficiency using the equation above: 

Eop = OE / TR

Inserting the values from above and solving the equation: 

Eop = 4000 / 9000 = .44

FAQ

What factors can affect Operational Efficiency?

Several factors can impact Operational Efficiency, including cost management, revenue generation strategies, operational processes, and market conditions. Efficient cost management and optimized operational processes typically lead to higher operational efficiency.

How can a company improve its Operational Efficiency?

A company can improve its Operational Efficiency by reducing operating expenses, increasing total revenue, streamlining processes, and adopting technology solutions that enhance productivity and reduce waste.

Is a higher Operational Efficiency ratio always better?

While a higher Operational Efficiency ratio generally indicates a more efficiently run operation, it’s essential to balance efficiency with quality and customer satisfaction. Excessively cutting costs to improve efficiency can sometimes negatively affect product quality or service levels.