Lenders use operating income as:
A) a measure of how well management achieved sales.
B) an indication of future sales.
C) a measure of how much debt a business can support.
D) an indication of a business's ability to control costs.

Question

Quizplus · Accepted Answer

Lenders use operating income as a measure of how much debt a business can support. Operating income shows the amount of profit a business generates before interest and taxes are deducted. Lenders want to know how much debt a business can handle before it becomes risky or unable to meet its financial obligations. Therefore, operating income is a key measure that lenders consider when determining whether to extend a loan or credit to a business.

Lenders Use Operating Income As