You Are a Banker Reviewing a Loan Application from a Local

question 112

Multiple Choice

You are a banker reviewing a loan application from a local business.Which of the following ratios would you look at to get a quick measure of the business's ability to meet its long-term financial obligations?

• A) Liquidity ratio
• B) Return on assets
• C) Debt ratio
• D) Current ratio
• E) Activity ratio

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Definitions:

Consolidated Statement

Financial statements that represent the combined financial results of a parent company and its subsidiaries.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Subsidiary

A company that is completely or partly owned and partly or entirely controlled by another company, which is referred to as the parent company.

Upstream

In an industry context, refers to the exploration and production stages in oil and gas, or more generally, to processes or activities that occur at the beginning of a supply chain.