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

A lower debt ratio indicates that the company has a lower level of debt compared to its assets, which makes it less risky and more creditworthy. Therefore, other things held constant, the bank would charge a lower interest rate to such firms. The other options are incorrect as higher current ratio, EBITDA coverage ratio, and TIE ratio indicate better financial health and lower risk for a company, which means the bank would charge a lower interest rate to such firms.

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