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Total Expense Ratio
An expense ratio is the percentage of a mutual fund's or variable annuity's total assets deducted to cover operating and management expenses.
Those expenses include employee salaries, custodial and transfer fees, distribution, marketing, and other costs of offering the fund or contract. However, they don't cover trading costs or commissions.
For example, if you own shares in a fund with a 1.25% expense ratio, your annual share is $1.25 for every $100 in your account, or $12.50 on an account valued at $1,000.
Expense ratios vary from one fund company to another and among different types of funds. Typically, international equity funds have among the highest expense ratios, and index funds among the lowest. Similar differences in expense ratios are characteristic of different variable annuity investment accounts.
A comparison of the operating expenses to potential gross income of a property in order to obtain a ratio that can be compared to other similar properties. In this manner, the owner may receive advance warning that rents are below market or expenses are too high. In addition, a potential buyer familiar with the ratios for similar properties may be forewarned if there is an unusually small ratio in a property under consideration.This could be the result of a seller not spending the proper sums to maintain and manage property, a seller performing its own maintenance without booking any expenses that might be incurred after the buyer takes over the property,or the seller omitting expenses. Purchasers interested in buying self-managed and maintained property will generally estimate a reasonable maintenance and management expense, and then reevaluate the estimated net income and the asking price in light of that information.