The jaws ratio is a measure used in

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

to demonstrate the extent to which a trading entity's income growth rate exceeds its expenses growth rate, measured as a percentage. A larger positive value demonstrates that a trading entity is effectively generating more income over time than it is generating expenses, thereby potentially increasing its profitability, and profitability growth rate. The ratio may also be a negative percentage, which should be a cause for concern for the owners/management of a trading entity as this will over time result in eroded profitability. The ratio is so named because, when these rates are graphed, the space between the lines resembles a pair of

jaw The jaw is any opposable articulated structure at the entrance of the mouth, typically used for grasping and manipulating food. The term ''jaws'' is also broadly applied to the whole of the structures constituting the vault of the mouth and serv ...

s. Strictly speaking, the jaws ratio is not a true ratio in that the calculation is not expressed as one number divided by another, and is calculated as follows: : . The jaws ratio is calculated by subtracting the expense growth rate from the income growth rate.

References

{{finance-stub Financial ratios