Skip to main content
–
Gearing is the relationship between debt and total equity included in the capital structure of a firm. The two items are different due to their characteristics. Debt is the capital amount that must be repaid and for which a certain amount, in the form of interest, must be paid at certain dates. Equity, on the other hand, is not usually recoverable from the company during periods of liquidation and does not always receive constant steady income.
Shares (both preference and common stock) are part of equity. Debt instruments include notes payable, bonds etc. Debt instruments must always been repaid in times of liquidation.
To assess the gearing, of a company, the total debt is divided by the total equity of the firm. For example, assume a firm has $10,000 5% Bonds selling at $11,000 (110%) and $5 par value common shares 100,000 units selling at $29, $2 par value 10,000 preference shares selling at $11. Also the firm had and Earnings before interest and taxes (EBIT) of $100,000.
The debt-to-equity gearing ratio, of the company, will be determinable as below:
SEE ATTACHED
In assessing debt-to-equity ratio the optimal value should be below at least 50%. Any value, above 50% means that the firm is heavily geared and much of its income would be paid to the external debtors. It also can trigger additional charges from the shareholders in the form of increased rate of return.
Another gearing measure is the times interest earned ratio. It measures the number of times income is covering the interest payment. Higher values, for the ratio, are desirable. There is usually no target ratio value.

Comments

Post a Comment

Popular posts from this blog

Identify and discuss a key milestone in the history of computers that interests you and why.

  Part 1Title: Lab ResponseDiscuss one feature of MS Word and one feature of MS Excel that you found challenging within the lab and why. Examples are WordArt, inserting shapes, adding borders, cell styles, etc. This response should be at least one paragraph in length. Part 2Title: History of Computers Identify and discuss a key milestone in the history of computers that interests you and why. This section should be at least one paragraph. Part 3Title: System Software vs. Application Software In your words, explain the difference between application software and system software as if to another coworker who has limited technical knowledge. Use examples to support your rationalization. This section should be at least two paragraphs. Part 4Title: Blockchain and Cryptocurrency In a minimum of one paragraph each: 1. Conduct some research on the internet and discuss one underlying technology of cryptocurrencies like blockchain, cryptography, distributed ledger technol...
Post a Comment
Read more

Cybersecurity and Infrastructure Security (CISA)

 Develop a research paper that identifies a specific Department of Homeland Security (DHS) operating agency. Fully describe 1 DHS operating agency from the following list: Cybersecurity and Infrastructure Security (CISA) U.S. Customs and Border Protection (CBP) U.S. Citizenship and Immigration Services (USCIS) Federal Emergency Management Agency (FEMA) U.S. Coast Guard (USCG) U.S. Immigration and Customs Enforcement (ICE) U.S. Secret Service (USSS) Transportation Security Administration (TSA) The information must include a discussion of the selected DHS agency. Identify the agency’s mission, goals, objectives, and metrics. Conduct an analysis of how these mission areas address the threats or challenges. Recommend agency program priorities among the current set of goals, objectives, metrics, or budget items. Justification of all choices is an essential element of this assignment. Reference all source material and citations using APA format. WE OFF...
Post a Comment
Read more

Discuss how the project

ord count : no idea 1. You are required to write a report on all project activities involved in all the 10 knowledge areas of project management for the entire project life cycle. You should also include a list of the respective PM documents, for example PM Plan, PM Quality Management Plan, Risk management, Procurement, etc. The report must include the activities that are considered before the project is closed out. 2. Discuss how the project quality management plan can provide adequate standards and controls in managing global teams in projects. Your discussion must provide adequate arguments for the need of cultural awareness and legal issues. Regards, The post Discuss how the project appeared first on My Assignment Tutor . Assignment status :  Resolved by our Writing Team Source@ PrimeWritersBay.com GET THIS PAPER COMPLETED FOR YOU FROM THE WRITING EXPERTS   CLICK HERE TO ORDER 100% ORIGINAL PAPERS AT PrimeWritersBay.com NO PLAGIARISM
Post a Comment
Read more