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Borrowing Ratio is a critical metric used by lenders and financial institutions to assess a company's creditworthiness. It provides valuable insights into a company's financial health and ability to repay its debts. The ratio is calculated by dividing the company's total debt by its earnings before interest, taxes, depreciation and amortisation (EBITDA).
A high borrowing ratio indicates that the company has a higher level of debt compared to its profits, which may be a concern for lenders, as it could indicate that the company may struggle to repay its debts. On the other hand, a low borrowing ratio suggests that a company has a lower level of debt and has a higher ability to repay its debts.
Understanding and analysing borrowing ratios is essential for relationship managers working in financial institutions, as it helps them make informed decisions when assessing the creditworthiness of their clients and in turn, helps mitigate risk and ensure sustainable lending practices.
Full company financial data and account filings are available through FullCircl's Customer Lifecycle Intelligence platform, including Borrowing Ratios. Visit https://fullcircl.com to find out more.
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