Posted in Finance, Accounting and Economics Terms, Total Reads: 238
Definition: Key Ratio
Key Ratios are any financial ratios that are helpful in interpreting financial statements and analysing financial position of a company. Key ratios are also used to compare one company’s financial position with another company or industry.
Some of the key ratios are price to earnings ratio, earnings per share, debt to equity ratio, debt to asset ratio, turnover ratio. Through these ration, company’s financial position can be analysed like how company is performing, what are the difficulties company is facing, company’s profitability and efficiency, company’s assets, liabilities and cash flows etc.
Investors and analyst do technical analysis of stock to decide whether to buy or hold or sell that stock. So analysis of key ratios is part of technical analysis. Key ratios help know past trends in the company’s financial performance.