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The efficiency ratio indicates the expenses as a percentage of revenue (expenses / revenue), with a few variations – it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizing efficiency ratios (reducing expenses and increasing earnings). The concept typically applies to banks.
There are two ways a bank can cannibalize revenue and, by implication, shareholder return: They can underwrite bad loans and/or operate inefficiently -- that is, to allow expenses to consume too ...
Liquidity ratios measure the availability of cash to pay debt. [3] Efficiency (activity) ratios measure how quickly a firm converts non-cash assets to cash assets. [4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6]
Capital adequacy ratio is the ratio which determines the bank's capacity to meet the time liabilities and other risks such as credit risk, operational risk etc. In the most simple formulation, a bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other lenders.
The accounting rate of return, also known as average rate of return, or ARR, is a financial ratio used in capital budgeting. [27] The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return.
This decomposition presents various ratios used in fundamental analysis. The company's tax burden is (Net income ÷ Pretax profit). This is the proportion of the company's profits retained after paying income taxes. [NI/EBT] The company's interest burden is (Pretax income ÷ EBIT). This will be 1.00 for a firm with no debt or financial leverage ...
The Incremental Capital-Output Ratio (ICOR) is the ratio of investment to growth which is equal to the reciprocal of the marginal product of capital. The higher the ICOR, the lower the productivity of capital or the marginal efficiency of capital. The ICOR can be thought of as a measure of the inefficiency with which capital is used. In most ...
Tiered interest offers different series of APY ranges depending on how much you deposit into a bank account — typically the more you deposit, the higher the rate of return. This is most common ...