Financial risk

1) sorry not ace ltd, the MCQ in kit that which of the following would be implied by a decrease in company operating gearing ratio, this is a wrong question?

The question in the kit is 'wrong' because it does not state how the operating gearing was being measured. With regard to financial gearing, there is no argument - high gearing ratio means high financial risk; low gearing ratio means low financial risk (whichever of the two measures of the gearing ratio is used).

1) Sir if a company calculates operating gearing as FC / VC, and if the ratio falls then in this case a) Operating risk decreases b) Profits are less risky c) Profits are less affected by change in sales and production volume and d) Company is less risky Is it right? 2) if a company calculates operating gearing as FC / VC, and if the ratio increases then in this case a) Operating risk increases b) Profits are more risky c) Profits are more affected by change in sales and production volume and d) Company is more risky Is it right? 3) if a company calculates operating gearing as VC / FC and if the ratio falls then in this case a) Operating risk increases b) Profits are more risky c) Profits are more affected by change in sales and production volume and d) Company is more risky Is it right? 4) if a company calculates operating gearing as VC / FC and if the ratio increases then in this case a) Operating risk decreases b) Profits are less risky c) Profits are less affected by change in sales and production volume and d) Company is less risky Is it right?

1. Yes 2. Yes 3. Yes 4. Yes