Many different financial ratios and "rules of thumb" have been promoted for financial institutions worldwide, but few have been consolidated into an evaluation program that is capable of measuring both the individual components and the system as a whole. Since 1990, the World Council of Credit Unions, Inc. has been using a set of financial ratios known as "PEARLS."

Each letter of the word PEARLS measures key areas of CU operations: Protection, Effective financial structure, Asset quality, Rates of return and cost, Liquidity and Signs of growth. The use of the PEARLS evaluation system accomplishes the following objectives:

A. OBJECTIVES

1. Executive Management Tool

Monitoring the performance of the credit union is the most important use of the PEARLS system. It is designed as a management tool that goes beyond the simple identification of problems. It helps managers find meaningful solutions to serious institutional deficiencies...

2. Standardized Evaluation Ratios and Formulas

The use of standardized financial ratios and formulas eliminates the diverse criteria used by credit unions to evaluate their operations. It also creates a universal financial language that everyone can speak and understand...

3. Objective, Comparative Rankings

The combined use of the standardized accounting system and the PEARLS performance indicators produces a completely new type of information: comparative credit union rankings...

4. Facilitate Supervisory Control

In addition to its usefulness as a management tool, the PEARLS system provides the framework for a supervisory unit at the National Federation. National Associations can use the financial ratios generated by PEARLS to conduct quarterly or monthly analyses of all key areas of credit union operations...

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