Which ratios would a banker be most interested, Financial Management

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Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.

Bankers and other lenders use liquidity ratios to see whether to expand short-term credit to a firm.  Liquidity ratios calculate the capability of a firm to meet its short-term obligations.  These ratios are significant because not a success to pay such obligations can lead to bankruptcy.  In general, the elevated the liquidity ratio, the more capable a firm is to pay its short-term obligations.

 


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