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Trading and Investment Terms

Key Ratio

Key ratios can be defined as the main arithmetic ratios that outline and abridge the current financial state of an organization.

 

Key ratios can be utilized to effortlessly to get an idea of an organization's financial status.

 

Organizations that are in acceptable state financially are going to have better ratios than those that are performing inadequately.

 

Key ratios take information from the subject organization's fiscal summaries, for example, the accounting reports, income reports and reports of cash flows.

 

Things on these reports are contrasted with other things to create ratios that reflect the main parts of the organization's financial situation like liquidity, profitability, use of debt and earnings ability.

 

There are a lot of key ratios employed by analysts in order to analyze an organization's financial situation. Most of the time, the ratios generally used are going to change by industry.

 

The same ratios employed to analyze technology organizations are not similar to ratios generally employed to analyze banks.

 

Ratios employed to analyze banks are the capital to assets ratio, the loan loss reserves to total loans ratio, the liquidity ratio etc.

 

These ratios give direct calculations of various aspects of a bank's resources, liabilities as well as cash flows.

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