Question

    While assessing the cred it risk of a borrower for a

    Term Loan, the most important ratio to be considered is ______ _ .  
    A Debt Service Coverage Ratio Correct Answer Incorrect Answer
    B Inventory Turnover Ratio Correct Answer Incorrect Answer
    C Current Ratio Correct Answer Incorrect Answer
    D Return on Equity Ratio Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The DSCR measures a borrower's cash flow vs. its debt obligations. Lenders use the DSCR to determine whether a borrower has enough net operating income to pay back loans.  

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