Asked by Deledai Johnson on May 02, 2024
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Financial ratios help lenders quantify a potential borrower's default risk before a loan decision is finalized.
Default Risk
The possibility that a debtor will fail to fulfill their financial liabilities as agreed upon.
Financial Ratios
Financial ratios are quantitative measures derived from financial statement analysis to evaluate the financial performance, condition, and valuation of a company.
Loan Decision
The process undertaken by lenders to determine whether to make funds available to borrowers under certain terms.
- Understand the utility of financial ratios in assessing a borrower's default risk and a company's performance.
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Learning Objectives
- Understand the utility of financial ratios in assessing a borrower's default risk and a company's performance.
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