Ratio analysis 0.0 / 5 ? Business StudiesFinancial PlanningA2/A-levelCCEA Created by: Football03Created on: 31-03-22 09:37 What does gearing measure? The firms level of debt 1 of 16 What is a bad/highly geared ratio? Above 50% 2 of 16 What is a good/lowly geared ratio? Lower than 50% 3 of 16 What can happen to highly geared ratio businesses? Suffer badly when there is a recession (revenue is falling, also have to make repayments on a loan to ban) 4 of 16 Why would shareholders/banks be interested in gearing ratio? To show how risky an investment a company is 5 of 16 What are the disadvantages of a high gearing ratio/loans? -Pay a large amount in interest, before paying dividends (shareholders may get frustrated/not continue investments) 6 of 16 What would a low gearing ratio indicate? -Unwilling to borrow/take risks 7 of 16 What 2 ways can you alter the ratio? -Retain more profits -Repay loans 8 of 16 What is shareholder ratios? Analysing the returns for the shareholders (the relationship between the number of shares issued and the company profits) 9 of 16 What is EPS? Measures the company's earnings(net profit) divided by the number of ordinary shares it has issued. 10 of 16 What does EPS show? The potential for paying out a dividend to shareholders 11 of 16 Is it better to have a higher or lower EPS? Higher 12 of 16 What 2 things must EPS be? -Use with ROCE -Compare to previous years 13 of 16 How would you increase EPS ratio? Increasing levels of profits 14 of 16 What is ROE? How well a company used reinvested earrings to generate additional earnings 15 of 16 What are two features of an ordinary shareholder ? -Voting rights -Doesn't always get dividends 16 of 16
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