"Where Everyone Has an MBA"
Tel: (612) 246-4616
Tel: (612) 246-4616
GEARING RATIO measures the percentage of capital employed that is financed by debt and long term financing. The higher the gearing, the higher the dependence on borrowing and long term financing. Whereas, the lower the gearing ratio, the higher the dependence on equity financing. Traditionally, the higher the level of gearing, the higher the level of financial risk due to the increased volatility of profits. Financial manager face a difficult dilemma. Most businesses require long term debt in order to finance growth, as equity financing is rarely sufficient, on the other hand, the introduction of debt and gearing increases financial risk. A high gearing ratio is positive; a large amount of debt will give higher return on capital employed but the company dependent on equity financing alone is unable to sustain growth. Gearing can be quite high for small businesses trying to become established, but in general they should not be higher than 50%. Shareholders benefit from gearing to the extent that return on the borrowed money exceeds the interest cost so that the market values of their shares rise. Formula: Long Term Debt / Shareholders Equity.
GENERALIZED AUDIT SOFTWARE is packaged computer programs used on a variety of computers during audit field work to read computer files, select information, perform calculations, create data files, and print reports in a format specified by the auditor.
COST is the amount of money that must be paid to take ownership of something; expense or purchase price.
Enter a term, then click the entry you would like to view.