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Bpp Question Newsam Co, part c. They asked about the high gearing assessment if it is dangerous.
On answer page, they have mentioned a paragraph that is up to my understanding. It is about the Quality of asset backed security.
I think I’m unable to explain fully. but can give me your valuable time to explain it if it is possible.
Many Thanks
I do not have BPP books.
However, in general, what they are talking about is that if a company is borrowing money from bonds then where will they get the money from to repay the lenders if the company ends up having to close.
If they have assets that they will be able to sell and get the money that way, then there is less of a problem.
However if the assets on the Statement of financial position are not actually worth very much, then things are a lot more worrying.So ‘quality of asset backing’ is looking to see if the assets on the Statement of the financial position are actually worth a lot or not.
Thanks for the info. Yeah I think it is saying to refresh its market value and see the surplus.
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