61 Ratio Analysis Flashcards
Calculate Gearing ratio & ROCE Interpret ratios to make business decisions Limitationd of ratio analysis
1
Q
Gearing ratio formula
A
(Non-current liabilities/Capital employed) x 100
2
Q
When is a business highly geared?
A
When,
Debts are high
relative to share capital
3
Q
As a business becomes more highly geared, the risk….
A
Increases
4
Q
Gearing ratio can be used to analyse business’s….
A
Capital structure
5
Q
What is the definition of capital structure?
A
Mix of different types of finance used by businesses.
Equity (capital from shareholders)
VS
Debt (capital provided by external finance providers,
e.g. banks providing loans)
6
Q
Capital employed formula
A
Total assets - current liabilities
