Which of the following would be most useful to you in deciding whether or not to make a short-term loan to a firm?
A)return on assets
B)return on sales
C)current ratio
D)EPS

Question

Quizplus · Accepted Answer

The current ratio, which is a measure of a firm's liquidity, would be most useful in determining whether or not to make a short-term loan. The current ratio compares a firm's current assets to its current liabilities, which gives an indication of its ability to meet its short-term financial obligations. A high current ratio indicates that a firm has a strong ability to pay back its short-term loans, while a low current ratio suggests the opposite. Therefore, the current ratio is a good indicator of a firm's short-term financial health and its ability to repay a short-term loan. Return on assets, return on sales, and EPS are measures of a firm's profitability, which are not necessarily relevant in evaluating its short-term financial health.

Which of the Following Would Be Most Useful to You