Gearing Ratios Flashcards
1
Q
What are Gearing ratios?
A
Help assess how much of the organisation is funded by borrowed money(debt). Includes Gearing (on ratio sheet).
2
Q
Gearing evaluation
A
Shows how much or a businesses capital is made up of borrowed money.
Typically figure is between 25%-50% is ideal.
Suggested that a businesses should have some form of gearing as its a good sign of investment and shows the business is continually growing.
If highly geared you are dependent on interest rates staying low (external factor).
Low gearing shows may be stagnant and not growing and not able to compete with growing competitors.
