Which of the following ratios would be of primary importance to a creditor in deciding to extend long-term credit?
A)Current ratio
B)Debt/equity ratio
C)Inventory turnover
D)Earnings per share

Question

Quizplus · Accepted Answer

The debt/equity ratio would be of primary importance to a creditor in deciding to extend long-term credit as it shows the amount of debt a company has in relation to the amount of equity. This ratio helps the creditor to assess the creditworthiness and financial stability of the company, indicating the level of risk associated with extending credit. A low debt/equity ratio suggests that a company has less debt and is less risky, making it more attractive to creditors.

Which of the Following Ratios Would Be of Primary Importance