Key Ratio

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Tier 1 Capital

    A term used to describe the capital adequacy of a bank. Tier ...
  2. Liquidity Ratios

    A class of financial metrics that is used to determine a company's ...
  3. Capital Adequacy Ratio - CAR

    A measure of a bank's capital. It is expressed as a percentage ...
  4. Current Ratio

    A liquidity ratio that measures a company's ability to pay short-term ...
  5. Precedent Transaction Analysis

    A valuation method in which the prices paid for similar companies ...
  6. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
RELATED FAQS
  1. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... Read Full Answer >>
  2. What level of annual growth is common for companies in the Internet sector?

    The Internet services sector consists of a diverse group of companies that exhibit strong growth potential. Investors often ... Read Full Answer >>
  3. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  4. How are fixed costs treated in cost accounting?

    Fixed costs are one of the two major inputs, along with variable costs, in cost accounting that are used by a company's management ... Read Full Answer >>
  5. When would a vendor care about its accounts payable turnover ratio?

    Vendors can act as suppliers or manufacturers, so they must pay attention to accounts payable and accounts receivable. An ... Read Full Answer >>
  6. What are common growth rates that should be analyzed when considering the future ...

    Some of the most common growth rate metrics that investors and analysts consider in evaluating a company's future prospects ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  3. Forex Education

    How To Use The P/E Ratio And PEG To Tell A Stock's Future

    While the price-to-earnings ratio is commonly used for assessing stock prices, the price/earnings-to-growth ratio offers forecasting advantages that investors need to know.
  4. Fundamental Analysis

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  5. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  6. Markets

    Understanding The P/E Ratio

    Learn what the price/earnings ratio really means and how you should use it to value companies.
  7. Fundamental Analysis

    Are Fast-Casual Restaurants Overvalued?

    Can fast-casual restaurants actually grow to the levels that investors believe they can?
  8. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  9. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  10. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!