Can a business client repay a loan on time? This is an important question to small business lenders.

While no one can predict the future with 100% accuracy, lenders rely on a few simple arithmetic ratios to make credit decisions. These metrics of financial performance measure a company’s ability to pay short-term and long-term obligations:

Current ratio = current assets / current liabilities

Quick ratio = (cash + accounts receivable) / current liabilities or

Quick ratio = (current assets – inventory) / current liabilities

Debt ratio = total liabilities / total assets

Long-term debt ratio = long-term debt / total assets