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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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50% - Moderately

Ratio


Synonyms:gauge
Filed Under: financial-banking, mortgages
Tags: banking, mortgage
 

Definition of ratio

ratio
1. A comparison of two figures used to evaluate business performance (e.g. debt/equity ratio and return on investment). It is a relation in degree or number between two similar things.

Related Terms and Acronyms:

  • debt/equity ratio   A comparison of debt and equity used to measure the health of a business.
  • equity   The value of a property minus outstanding mortgage debt and other liens.
  • gross debt service (GDS)   The total monthly mortgage (or rent) payments, property taxes, utilities and maintenance fees as a percentage of gross monthly income.
      ➥  Used by mortgage lender underwriters to determine one's ability to qualify for a mortgage loan.
  • loan-to-value (LTV)   The ratio of the principal amount of the loan to the lesser of the purchase price of the property or the property's appraised value. This can be expressed as an 80% loan, or 80% LTV.
      ➥  A widely used term in the mortgage brokerage and lending industry, especially by mortgage underwriters.
  • overall liquidity ratio   A method of determining how easily and quickly a company can sell off assets to pay off its debts.
  • qualifying ratios   As calculated by lenders, the percentage of income that is spent on housing debt and combined household debt. The first qualifying ratio, called the gross debt service or GDS is up to and including a maximum of 32% of the combined gross family income. The second qualifying ratio is the Total debt service or TDS is up to and including 40% of gross income.
  • quick liquidity ratio   A metric used to find if a company has enough liquidity to make it's short term financial obligations.
  • return   Any increase in value or in income you earn on purchase or investment.
  • return on assets (ROA)   A ratio that shows how profitable a company is when compared to its assets.
  • return on equity (ROE)   A ratio that shows how profitable a company is when compared to shareholder equity.

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