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PM Chapter 15 Questions Financial Performance Measurement

8 Comments

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  1. rosscraven1 says

    November 12, 2019 at 8:47 am

    Do we get these ratios on a formula sheet during the exam?

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  2. alimohsinraza says

    August 22, 2019 at 8:09 pm

    sir i have a confusion. as gearing is also measured by the formula Total assets-current liabilities. in Qs 5 as we write of inventory it results in decrease of total assets so gearing should decrease…then why is the correct answer increasing ?

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    • John Moffat says

      August 23, 2019 at 9:35 am

      Gearing is not measured as total assets minus current liabilities!!

      It is measured as long-term debt divided by equity plus long-term debt. Equity plus long-term debt is equal to total assets less current liabilities. If inventory is written off then total assets less current liabilities decreases. Since this is the denominator in the formula for the gearing ratio, the gearing ratio will increase.

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  3. annavera says

    February 3, 2019 at 12:24 am

    Write off inventory question Nr 5 – The correct answer is ‘Increase Gearing Ratio’.

    Please can you advise how write off inventory can influence gearing ratio?

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  4. leandrotorres22 says

    September 5, 2018 at 3:11 am

    For number 5 how does the write off of inventory increase the gearing ratio?

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    • John Moffat says

      September 5, 2018 at 6:02 am

      Writing off inventory will reduce the profit, which in turn reduces the total equity. Therefore the gearing will increase.

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      • leandrotorres22 says

        September 5, 2018 at 7:02 am

        Thank you for clarifying 🙂

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      • John Moffat says

        September 5, 2018 at 2:17 pm

        You are welcome 🙂

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