A Bank That Wants to Examine the Operating Efficiency of a Borrower

question 146

Multiple Choice

A bank that wants to examine the operating efficiency of a borrower would most likely examine which of the following ratios?

• A)Cost of goods sold ÷ Average inventory
• B)Income before interest and taxes ÷ Interest payments
• C)Cost of goods sold ÷ Net sales
• D)Current assets ÷ Current liabilities
• E)All of the options are correct.

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Definitions:

Carrying Costs

Carrying costs are expenses associated with holding inventory, including storage, insurance, and opportunity costs, among others.

Roller Skates

Wheeled footwear designed for rolling along surfaces, offering a mode of transportation or recreational activity.

Effective Annual Interest Rate

The real rate of interest earned on an investment or paid on a loan over one year, taking into account the effect of compounding.