gearing ratios Flashcards
1
Q
what do gearing ratios show?
A
measures the degree of risk & gives insight into how the business is funded
2
Q
what is the equation for gearing? give relevant units.
A
(current + non current debt) / (current + non current debt + equity)
%
3
Q
what is the equation for interest cover?
A
profit before interest & tax / interest
times
4
Q
what does it mean if a firm is “highly geared”?
A
firms have more debt and are riskier to shareholders. check notes for diagram
