Definition of Operational efficiency:
Operational efficiency in the investment markets is typically centered around transaction costs associated with investments. Operational efficiency in the investment markets can be compared to general business practices for operational efficiency in production. Operationally efficient transactions are those that are exchanged with the highest margin, meaning an investor pays the lowest fee to earn the highest profit. Similarly, companies seek to earn the highest gross margin profit from their products by manufacturing goods at the lowest cost. In nearly all cases, operational efficiency can be improved by economies of scale. In the investment markets this can mean buying more shares of an investment at a fixed trading cost to reduce the fee per share.
Operational efficiency is primarily a metric that measures the efficiency of profit earned as a function of operating costs. The greater the operational efficiency, the more profitable a firm or investment is. This is because the entity is able to generate greater income or returns for the same or lower cost than an alternative. In financial markets, operational efficiency occurs when transaction costs and fees are reduced.
Formula: Actual output in a period x 100 ÷ Maximum rated output.
How to use Operational efficiency in a sentence?
- Operational efficiency was not something that the management team had ever considered. They hired a new expert to review the manufacturing process for areas of opportunity.
- For investors and traders, markets exhibit operational efficiency when transaction costs are low.
- The company looked at how well we were performing as compared to how they expected us to perform. They decided our operational efficiency was too low, and we needed to be more productive.
- And that, over there, is the operational efficiency dial; as you can see, it most definitely does go to 11.
- Operational efficiency is a measure of how much costs are incurred during a given economic or financial activity, where lower costs equals greater efficiency.
- Offering bulk discounts or free commissions to traders is one way to increase the operational efficiency of investment markets.
Meaning of Operational efficiency & Operational efficiency Definition