If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?

Question

Quizplus · Accepted Answer

The lower the debt ratio, the lower the risk for the bank, which means a lower interest rate. A higher debt ratio means a higher probability of default and therefore a higher interest rate. The other options are incorrect because a lower current ratio, lower EBITDA coverage ratio, or lower TIE ratio all indicate a higher risk for the bank, which would result in a higher interest rate, not a lower one.

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