Tuesday, December 14, 2010

Financial descriptions!

Credit Rationing

A situation in which the lenders refuse to advance loans to all borrowers at the prevailing interest rate. It is considered a problem resulting due to information and control limitations. Credit rationing eventually leads to an excess demand for loans among borrowers.

Equity Ratio

An indicator of a firm’s financial leverage. It measures the proportion of total assets financed by the stockholders. Equity ratio is calculated by dividing total liabilities by shareholder’s equity. Also known as personal debt ratio
Equity ratio can be represented as a percentage value of shareholders equity/total assets.

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