Why Financial Ratios?
Financial ratios offer a capsulated view of key conditions affecting the fundamental elements of financial health and provide answers to certain questions concerning an institution? overall financial condition. Ratios, in their simplest terms, are the relationship between two numbers, a numerator and a denominator, and each ratio’s utility lies in its ability to impart greater knowledge than is readily discernible from each of the numbers standing alone. In converting amounts from financial statements to ratios, comparison between different size institutions is made possible. Since individual ratios provide insight into specific elements of financial health, carefully selected ratios, viewed together as a whole, provide an efficient means for assessing any institution’s overall financial condition. Financial Responsibility Methodology KPMG, in consultation with ED and representatives from the higher education community, selected three ratios to measure the five fundamental elements of
