to which financial ratios would you pay most attention
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Credit Analysis. Financial ratios were described in Chapter 17. If you were the credit manager,
to which financial ratios would you pay most attention?
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Hi there,
If I were a credit manager, I would pay the most attention to the following ratios:
Bad-debt to Accounts Receivable ratio measures expected uncollectibility on credit sales. An increase in bad debts is a negative sign, since it indicates greater realization risk in accounts receivable and possible future write-offs.
Formula: Bad Debts / Accounts Receivable
Bad-Debt to Sales Ratio
Bad-debt ratios measure expected uncollectibility on credit sales. An increase in bad debts is a negative sign, since it indicates greater realization risk in accounts receivable and possible future write-offs.
Formula: Bad Debts / Sales
Current Ratio: A liquidity ratio that measures a company's ability to pay short-term obligations; calculated by dividing current assets by current liabilities. This also helps to give an idea as to the efficiency of the company's ...
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