The Most Common Reason Cited by Banks for Rejecting Small

question 82

Multiple Choice

The most common reason cited by banks for rejecting small business loans is:

• A)poor credit history.
• B)undercapitalization or too much debt.
• C)lack of collateral.
• D)insufficient cash flow or poor profitability.

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Definitions:

Long-Term Debt

Borrowings and financial obligations that are due for repayment beyond one year's time, often used for major investments or acquisitions.

Profit Margins

Financial ratios that measure the percentage of profit a company generates from its revenues, indicating the efficiency at which a company converts sales into profits.

Asset Turnover Ratios

Asset turnover ratios measure how efficiently a company uses its assets to generate sales, indicating operational efficiency.

Financing Policies

These are strategies that a company formulates for managing its finances, including decisions on debt, equity, and internal financing methods.