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.
BREAKING DOWN ‘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.