Financial ratios used to determine credit risk include an assessment of
A)liquidity and asset utilization.
B)asset utilization and profitability.
C)solvency and liquidity.
D)profitability and solvency.

Question

Quizplus · Accepted Answer

Financial ratios used to determine credit risk typically focus on a company's ability to meet its debt obligations. Solvency ratios, which assess a company's ability to repay debt over the long term, and liquidity ratios, which measure a company's ability to meet short-term debt obligations, are key indicators of credit risk. Profitability ratios and asset utilization ratios are important for assessing a company's overall financial health, but they may not provide the same level of insight into credit risk.

Financial Ratios Used to Determine Credit Risk Include an Assessment