Gearing ratio By Lachy, Vicente and Aprile. Gearing ratio Gearing measures the percentage of a firms capital employed that comes from long-liabilities,

Slides:

Advertisements

Similar presentations

RATIO ANALYSIS 3 types Profitability – is the organisation earning more than it spends. Liquidity – is there enough money to cover all bills. Efficiency.

Advertisements

1 Financial Planning and Forecasting Ing. Zuzana Čierna, PhD. Department of Finance SPU – FEM, Nitra.

Calculating Liquidity. What is liquidity? liquidity means how much money the firm has to spend and invest. The higher the liquidity, the more cash or.

Chapter 2 - Understanding Financial Statements, Taxes, and Cash Flows  2005, Pearson Prentice Hall.

THE BALANCE SHEET Also called ‘Statement of Financial Position

Assessing Business Performance Chapter 6. Structure of Balance Sheet Current assets$100 Other assets500 Total assets$600 Page 127.

Monitoring the Business

MODULE 4 RATIO ANALYSIS A2 Marketing and Accounting and Finance Gearing.

Calculating Return on Capital Employed (ROCE)

Unit 3 Accounts & Finance

Agribusiness Library LESSON L060087: CALCULATING NET WORTH.

Overview of Finance. Financial Management n The maintenance and creation of economic value or wealth.

Part 7: Chapter 47 An introduction to the analysis and interpretation of accounting statement By: Nenae 11gs.

JSC " AEROFLOT " 12 months 2004 FINANCIAL RESULTS In accordance with IAS (audited, consolidated)

Financial Statement Analysis

Calculating Gearing.

HFT 2403 EXAM 2 REVIEW.

Ratio Analysis. Financial Analysis Comparing Financial Statements Condensed Statement Analysis Trend Analysis Ratio Analysis Comparison with Similar Businesses.

Question for understanding ratios Using the following information, Calculate the firm’s debtor’s turnover and briefly explain the ratio you have calculated.

FINANCIAL PERFORMANCE ACCOUNTING RATIOS. Accounting Ratio Analysis Information contained in financial statements is of major significant to internal and.

Chapter 2 - Understanding Financial Statements, Taxes, and Cash Flows 09/02/08.

Question: As you read the balance sheet from top to bottom, what is happening to the liquidity of the assets?

IB Business and Management

Course Setting up Financial Ratios. What are Financial Ratios? A financial ratio is a relative magnitude of two selected numerical values taken.

Learning area 9 Chapter 12: Interpretation of accounts Lecture 1.

Financial Statements and Cash Flow CHAPTER 2.1. Key Concepts and Skills Understand the information provided by financial statements Differentiate between.

Analysis of Financial Statements Balance sheet as per revised schedule VI Financial Statements are the end result of the accounting process. These are.

Balance sheet Business Studies.

Balance Sheet A balance sheet is one of the three annual financial statements that companies are legally required to produce for auditing purposes. It.

Balance sheet as at 01/04/11 $000$000$000 Fixed assets 500 Current assets: Stock 50 Debtors 150 Cash

Intro to Financial Management Evaluating a Firm’s Financial Performance.

In looking for the success of Williams- Sonoma, Inc., should you just look at the net income on the income statement? 1.Yes 2.No.

USING THE INFORMATION IN THE FINANCIAL STATEMENTS Financial ratios are calculated to evaluate the short-term liquidity of a company. These ratios include.

JSC " AEROFLOT " 6 months 2005 FINANCIAL RESULTS in accordance with IAS (non audited, non consolidated) Титульный лист.

Module Accounting & Finance Topic Ratio Analysis.

Interested parties  Shareholders - to measure management’s performance  Investors - to make their investment decisions  Management - to plan and control.

Unit 5. The purpose of Unit 5 is to define the four basic financial statements and discuss the information presented on each.

HIGHER LEVEL ASSESSING A BUSINESS. Overview Who is interested in the accounts of a business? Profitability ratios Liquidity ratios Activity ratios Dividend.

Chart of Accounts.

Understand a financial statement. Objective 2.02.

Financial Statement Analysis

T HE I NTERPRETATION OF FINANCIAL STATEMENTS Profitability, liquidity, efficiency, gearing ratios.

Announcements It’s LSAT week! I take the test on Saturday. If you are sick, stay AWAY from me Most of IA material will be covered this week Summatives.

IGCSE Business studies Accounting and finance

RATIO ANALYSIS DELVING DEEPER INTO FINANCIAL STATEMENT ANALYSIS.

HFT 2401 EXAM 2 REVIEW. Problems to Complete 1) A departmental income statement 2) A statement of retained earnings 3) A chart demonstrating where various.

Monitoring the Business + - x ÷ ÷ x x ÷ : : : : Ratio Analysis C. O' Brien Chanel College.

Interpreting accounts The objective of financial statements is to provide information that is useful to a wide range of users in making economic decisions.

Financial Statements and Ratios Look up your stock portfolio at Howthemarketworks.com.

 The more you use these ratios and the more you practice using them the easier it will be to remember the calculations, apply them in your exam and.

Ratio Analysis. Use of Ratio Analysis To analyse Performance Liquidity Shareholder Investment.

F9 Financial Management. 2 Designed to give you the knowledge and application of: Section E: Business Finance E1. Sources of, and raising short-term finance.

BALANCE SHEET. Starter – DON’T LOOK IN BOOKS !!! What does a Trading, Profit and Loss Account show? What does an Appropriation Account show? How is it.

Financial Statements and Cash Flow Chapter Financial Cash Flow  In finance, the most important item that can be extracted from financial statements.

Ratio Analysis…. Types of ratios…  Performance Ratios: Return on capital employed. (Income Statement and Balance Sheet) Gross profit margin (Income Statement)

BUSS3 January Ratios In pairs: write everything about the following ratios (use the formula sheets to help): ROCE Gearing Current ratio Limitations.

Ratio analysis. Ratio analysis is used to help interpret a firm’s financial data. The five main types of ratios are: Profitability ratios Liquidity ratios.

Cluster 3 Financial Statements and analysis. Net Sales Less Cost of goods Sold = Gross Profit from Sales Less Fixed Operating Expenses Less Depreciation.

Unit 2 Financial & Management Accounting

Chapter 2 - Understanding Financial Statements, Taxes, and Cash Flows

Ratio Analysis - Gearing

Assessing Balance Sheet

إعداد القوائم المالية Preparation of Financial Statements

BUSINESS HIGH SCHOOL-ACCOUNTING II

CAPITAL Defination Methods of Obtaining Capital

Even More Financial Ratios

Intro to Financial Management

COST OF CAPITAL 1.

RVS Institute of Management Studies FINANCIAL REPORTING AND ANALYSIS

Interpreting Accounts

Presentation transcript:

Gearing ratio By Lachy, Vicente and Aprile

Gearing ratio Gearing measures the percentage of a firms capital employed that comes from long-liabilities, such as debentures and mortgages. The gearing ratio is an accounting used to assess a firms long term liquidity position. Shareholders and investors are interested in the gearing ratio as it helps assess the level of risk.

Example For example a firm long term liabilities total 5 million whilst its capital employed is 20 million, calculate the gearing ratio? Step 1: Locate the formula in the data booklet. Step 2: Identify numbers given from extract and substitute into formula Step 3: State as a percentage Gearing ratio = 25%

What does this all mean? If the gearing ratio is over 50%, the firm is considered to be ‘highly geared’. Such firms a vulnerable for increases in interest rate since it has to make large repayments of interest and capital. If the gearing ratio is less than 50%, then the firm is considered to be ‘low geared’. Since its repayments do not form a significant proportion of its regular outgoings.

Relation to financial statements Balance statement In regard to the balance sheet capital employed will be represented at the bottom of the statement. In order to balance the statement the ‘money’ sourced from capital employed will be spread amongst fixed assets, current and non-current assets.