Income Gap Ratio Calculation

A ratio of greater than 1 0 indicates a company has high quality.

Income gap ratio calculation. Concepts the poverty line is a common method used to measure poverty based on income or consumption levels. A gap analysis is the means by which a company can recognize its current state by measuring time money and labor and compare it to its target state. It measures the incidence of poverty and helps to understand whether the poverty is reducing or not. The income gap ratio igr i totals the income short fall of the poor p yi i as a fraction of minimum total income if all poor were brought out of poverty p hc igr p hc.

Poverty ratio pr or head count ratio hcr is defined as the proportion of poor to the total population. To find the cost to income ratio divide acme s operating expenses by its operating income. It is the average of the difference between the income of each individual poor and poverty. For example statistics canada gives the example of people living in a household with an income of 15 000 per year.

In this lesson you learned the quality of income ratio is calculated with cash flow from operations being divided by net income. Looked at in terms of the whole economy the commonest income gap is that between rich and poor with the rich usually being defined at the top 20 of income earners the top quintile and the poor the bottom 20 bottom quintile. The company will usually express this as a percentage being a 54 5 percent cost to income ratio. Income gap ratios analyze how far below or above a certain income level people or households are.

It also has an operating income of 275 000. For example an individual living in a family or household with an income of 15 000 and a lil of 20 000 would have a low income gap of 5 000. Easy to calculate and understand but i ignores incomes between percentiles i ignores incomes above the highest and below the lowest. Note 4 the average gap ratio for a given population is the average of these values as calculated for each person.

An income gap is a gap in income between one group and another. Rate sensitive assets and liabilities are those likely to increase or decrease substantially in value due to changes in interest rates a gap ratio over 1 indicates that there are more rate sensitive assets than liabilities meaning revenue or profits will likely increase as interest rates rise. If the low income cut off is 20 000 they would have a low income gap of 5 000. The ratio of a company s rate sensitive assets to its rate sensitive liabilities.

In percentage terms the gap ratio would be 25.