# Information on Ratios

This information page contains a list of the most common financial terms that contain the word ‘ratio’, plus hyperlinks to articles that explain their meanings in more detail.

A ratio shows the relation between two amounts, showing how many times one value is contained within the other.

The modern English word ‘ratio’ comes from the Latin word *‘ratio’* which meant *‘numbering, reckoning, calculation, procedure’*. Its mathematical meaning (relationship between two numbers) emerged in the English language in the 1650s.

**Book-to-Bill Ratio** – a measurement that shows whether demand is growing or shrinking. A ratio of greater than 1 suggest demand is exceeding supply. A metric that is followed widely in the semiconductor manufacturing industry. Also known as *BO/BI ratio* or *BB ratio*.

**Capital Adequacy Ratio (CAR) How CAR is calculated **– shows how capable a bank is to absorb losses. It is determined by calculating the ratio of capital to risk.

**Cash Ratio** – calculated by dividing all cash and cash equivalents by current liabilities. One of several ratios that measures a business’ liquidity. Also known as cash *coverage ratio* or *cash asset ratio*.

**Combined Ratio** – shows how profitable an insurance firm is in its underwriting operations. The calculation does not include investment income. Usually expressed in percentage terms, any figure less than 100% means it is profitable.

**Current Ratio** –a metric that tells us whether a business might find it hard to meet its short-term debts, i.e. obligations that need to be met within the next 12 months. Current Ratio equals Current Assets divided by Current Liabilities.

**Debt Equity Ratio** – a measure of the ratio between capital coming from stockholders and capital originating from creditors. This metric tells us what proportion of a business’ assets are financed by debt and equity.

**Debt Ratio** – a metric that shows us what proportion of a person’s or company’s assets consists of debt. It reveals the extent of an entity’s leverage. Debt ratio, at national level, could refer to the ratio of government debt to GDP.

**Dividend Payout Ratio** – the proportion of a company’s profits that are paid out as dividends to shareholders over a given period. The figure can be expressed as a percentage or decimal.

**Dividend Price Ratio** – a share’s dividend as a percentage of its price. Also known as dividend yield.

**Expense Ratio** – a mutual fund’s total operating expenses as a proportion of the average net assets of the fund.

**Financial Ratios** – several different metrics (ratios), calculated by using data from a company’s financial statement, that compare its performance and ability to meet short- and long-term obligations.

**Loan to Value Ratio (LTV Ratio)** – calculates the risk of people seeking to borrow money. It is commonly used by financial institutions (banks). The higher the ratio the greater the risk.

**Price-Earnings Ratio (P/E ratio)** – measures a company’s current share price compared to its earnings per share. It could signal high earnings and future growth.

**Price-to-Book Ratio** – a ratio that compares a stock’s current market price to its book value. Analysts use this calculation to determine whether a share is worth purchasing. Also *called P/B ratio* or *market-to-book ratio*.

**Price-to-Sales Ratio** – the market value’s ratio of equity to sales. One divides a company’s share price by its sales revenue per share over a 1-year period. Also called *PSR*, *price-sales ratio*, or *P/S ratio*.

**Quick Ratio** – measures a business’ ability to clear all current liabilities by using its most liquid assets. It indicates how strong a company is financially.