How does fluctuations in ratios for the company affect credit decisions in Bank

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Fluctuations in ratios for a company can significantly impact credit decisions in a bank.

Fluctuations in ratios provide insights into the financial health and stability of a company.
Negative fluctuations in key ratios such as debt-to-equity ratio or interest coverage ratio may indicate increased credit risk.
Positive fluctuations in profitability ratios like return on assets or return on equity may enhance creditworthiness.
Banks may adjust credit terms, interest rates, or loan amounts based on the observed fluctuations in ratios.
For example, if a company's debt-to-equity ratio increases significantly, indicating higher leverage, the bank may offer a lower credit limit or higher interest rate to mitigate the increased risk.

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