Lenders use operating income specifically
A)as a measure of how well management achieved sales.
B)as an indication of future sales.
C)as a measure of how much debt a business can support.
D)as 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. This is because operating income represents the amount of revenue that is left after deducting operating expenses such as wages, rent, and utilities. This figure gives lenders an idea of how much cash flow a business has to meet its debt obligations, which is critical in determining whether a borrower is loan-worthy.

Lenders Use Operating Income Specifically