If a bank loan officer were considering a company's request for a loan,which of the following statements is correct?

Question

Quizplus · Accepted Answer

A lower debt ratio indicates that the company has a lower level of debt relative to its assets, which makes it less risky for the bank to lend money. Therefore, the bank would charge a lower interest rate to such a company to encourage them to take a loan. A higher debt ratio would indicate higher risk, which would result in higher interest rates. Similarly, lower EBITDA coverage and TIE ratios indicate higher risk and financial distress, which would result in higher interest rates. Therefore, options A and D are incorrect, and option B is opposite to the correct answer.

If a Bank Loan Officer Were Considering a Company's Request