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Which of the following ratios are taken into consideration by a banker before sanctioning the loan ?

  • A.Proprietory Ratio
  • B.Stock-Turnover Ratio
  • C.Debt-Equity Ratio
  • D.All of the above

Answer: C

The official key gives the debt-equity ratio, option (C), as the ratio that a banker looks to before sanctioning a loan. It shows how far the business is financed by borrowing against the owners' funds, and so measures the safety of the money the banker is asked to lend.

The proprietary ratio and the stock turnover ratio also give information about the firm, but the key does not take them as the ratio to consider here, and so the option that says all of the above is also rejected.

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