gearing ratios analysis Flashcards
1
Q
debt to equity formula
A
debt / equity
2
Q
gearing formula
A
debt / (debt + equity)
3
Q
interest coverage
A
profit before interest and tax / interest payable
4
Q
debt to equity definition
A
shows how much debt a company has compared to its assets
5
Q
debt to equity interpretation
A
- a high debt-to-equity ratio indicates that a company is borrowing more capital from the market to fund its operations
- a low debt-to-equity ratio means that the company is utilizing its assets and borrowing less money from the market
6
Q
gearing definition
A
compares a company’s debt to its equity, or other metrics like assets
- Gearing is a measure of how much of a company’s operations are funded using debt versus the funding received from shareholders as equity.
7
Q
gearing ratio interpretation
A
- a high gearing ratio indicates that a company has a higher degree of financial leverage. - but does not always indicate that they are in a poor financial position
