Question: In the 5Cs method, the lender uses financial ratios such us Current Ratio, Inventory Turnover Ratio, Gross ProfitSales Ratio and Interest Coverage Ratio to decide

  1. In the 5Cs method, the lender uses financial ratios such us Current Ratio, Inventory Turnover Ratio, Gross ProfitSales Ratio and Interest Coverage Ratio to decide whether to accept a loan application of a firm or to reject it. Please explain the role of each ratio in shaping the lender decision.
  • Current ratio:

  • Inventory Turnover Ratio:

  • Gross ProfitSales Ratio:

  • Interest Coverage Ratio:

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