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Key Ratio

What is 'Key Ratio'

A mathematical ratio that illustrates and summarizes the current financial condition of a company. Key ratios can be used to easily obtain an idea of a company's financial status. Companies that are in good condition financially will have superior ratios to those that are performing poorly.

Explaining 'Key Ratio'

There are actually several different key ratios used by analysts to examine a bank's financial condition. These include the capital to assets ratio, the loan loss reserves to total loans ratio, the liquidity ratio and many others. These ratios provide direct measures of different specific aspects of a bank's assets, liabilities and cash flow.


Further Reading


Data envelopment analysis applied to financial statements
www.sciencedirect.com [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

An empirical comparison of published replication research in accounting, economics, finance, management, and marketingAn empirical comparison of published replication research in accounting, economics, finance, management, and marketing
www.sciencedirect.com [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

Does financial development hold the key to economic growth? The case of Sub-Saharan AfricaDoes financial development hold the key to economic growth? The case of Sub-Saharan Africa
www.jstor.org [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

Financial ratio proportionality and inter-temporal stability: An empirical analysisFinancial ratio proportionality and inter-temporal stability: An empirical analysis
www.sciencedirect.com [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

Crowding out or crowding in? The economic consequences of financing government deficitsCrowding out or crowding in? The economic consequences of financing government deficits
www.nber.org [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

Financial development shocks and contemporaneous feedback effect on key macroeconomic indicators: a post Keynesian time series analysisFinancial development shocks and contemporaneous feedback effect on key macroeconomic indicators: a post Keynesian time series analysis
www.sciencedirect.com [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …

Financial deepening and economic development of Nigeria: An empirical investigationFinancial deepening and economic development of Nigeria: An empirical investigation
papers.ssrn.com [PDF]
… 2 In effect, this analysis converts the key ratio of return on capital employed … Forecasting corporate failure in the UK using discriminant analysis and financial ratio data … ADDRESS FOR CORRESPONDENCE: Peter Smith, Department of Economics and Related Studies, Unirersity …



Q&A About Key Ratio


What is a key ratio?

A key ratio is a mathematical ratio that illustrates and summarizes the current financial condition of a company.

Why do we use ratios?

We use ratios to evaluate the overall financial condition of an organization.

What are some examples of other key ratios used by analysts?

Liquidity ratio and many others. These ratios provide direct measures of different specific aspects of assets, liabilities and cash flow.

What are the two numerical values used in calculating a key ratio?

The two numerical values used in calculating a key ratio are usually from an enterprise's financial statements.

Are there several different types of key ratios?

Yes, there are several different types.

How can you use key ratios to easily obtain an idea of a company's financial status?

Key ratios can be used to easily obtain an idea of a company's financial status by using them as direct measures of different specific aspects of assets, liabilities and cash flow.

What does multiples mean?

Multiples means that one number can be divided by another number to get the first number; for example, if you divide 100 by 10, you get 10 as your result because 100/10 = 10.

What do these other key ratios measure specifically?

They measure various aspects such as liquidity, capital adequacy, asset quality etc..

How many standard ratios are there?

There are many standard ratios, including earnings yield and PE ratio.

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