Gearing ratios

These measure the financial risk of a firm (the probability that a firm will not be able to pay up its debts). The more debts a business has (non owner supplied funds) the higher the financial risk.

 

This ratio measures how much has been financed by the non-owner supplied funds in relation to the amount financed by the owners i.e. for every shilling invested in the business by the owners how much has been financed by the non-owner supplied funds.
For ABC Ltd, for every 1 shilling contributed in the business by the owner, the creditor has put in 67 cents. The higher the financial risk.

(Visited 114 times, 1 visits today)
Share this:

Written by