Question

If we divide users of ratios into short-term lenders, long-term lenders, andstockholders,which ratios would each group be most interested in, and for

what reasons?

Short answer

Short-term lenders are more interested in the liquidity ratios whereas long-term lenders are interested in the leverage ratios and interest coverage ratios. In addition, the stockholders are interested in the profitability and market ratios to know the profitability of the company.

Step-by-step solution

Short term lenders are interested in liquidity ratios

Short-term lenders are interested in the short-term liquidity ratios because they owed their dues within one year.Therefore, they want to know whether the short-term assets of an organization are adequate to meet the short-term liabilities.

Long term lenders are interested in the leverage ratios and interest coverage ratios

Long-term lenders are concerned with the leverage and interest coverage ratios because they owe their dues over the long term.Therefore, they want to know whether the company is over-leveraged and whether the gross income of the company is sufficient to meet the finance cost.

Stockholders are interested in the profitability ratios and market ratios

Stockholders are concerned with the profitability ratios and the market ratiosbecause the stockholders want that the organization earn profits consistently over time and generate cash flow to distribute to the stockholders.