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

Question

Quizplus · Accepted Answer

A lower total debt to total capital ratio indicates that the company has less debt in proportion to their equity, which makes the company less risky and more likely to be able to repay its loan. Therefore, the bank would charge a lower interest rate. The other statements are not correct. A higher inventory turnover ratio and a lower current ratio may indicate financial strength, but they are not necessarily the only factors considered by the bank. A higher days sales outstanding ratio indicates that the company takes longer to collect its payments and may be seen as a riskier borrower, while a lower TIE ratio indicates that the company may have difficulty repaying its loans.

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