Which of the Following Ratios Is Given the Highest Significance

question 6

Multiple Choice

Which of the following ratios is given the highest significance rating by commercial loan officers?

• A)Inventory Turnover In Days
• B)Degree of Financial Leverage
• C)Times Interest Earned
• D)Fixed Charge Coverage
• E)Debt/Equity

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Definitions:

Vertical Analysis

The presentation of a company’s financial statements in common-size form.

Horizontal Analysis

A side-by-side comparison of two or more years’ financial statements.

Acid-Test Ratio

A financial metric used to evaluate a company's ability to pay off its current liabilities without relying on the sale of inventory.

Dividend Payout Ratio

A financial metric that shows the portion of a company's earnings paid out to shareholders as dividends.