QAEconomics › A short-term creditor would be most interested in
Q

A short-term creditor would be most interested in

A) profitability ratios.

B) asset utilization ratios.

C) liquidity ratios.

D) debt utilization ratios.

A

Answer: C) liquidity ratios.

With a short-term creditor, the most important thing is having a target company with a high liquidity ratio. This means that they are interested in the ability of the company to convert its assets and possessions into cash form and pay all of its obligations, as well as the amount of protection the company offers when liquidity does occur (the margin of safety).

A long term creditor cares about a high liquidity ratio because it reduces their risk of losing more than they gain.

1 year ago
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