John Hamann began his company making herb vinegars from a recipe his grandmother had given him.As demand grew,he had to buy a large commercial kitchen.Which of the following ratios would a banker have been most interested in before allowing Hamann to borrow $500,000?
A) Liquidity ratios
B) Profitability ratios
C) Debt ratios
D) Operating ratios
E) Activity ratios

Question

Quizplus · Accepted Answer

A banker would be most interested in a company's financial leverage or debt ratios before lending a significant amount of money. This ratio would help the banker ascertain whether the company would be able to repay the loan within the given timeline. In the case of John Hamann's company, the debt ratio would indicate whether the company has debt repayment capacity and whether the proposed loan amount would burden the company financially.

John Hamann Began His Company Making Herb Vinegars from a Recipe