A company borrows $10,000 repayable in five years’ time and immediately uses the loan to repay its
overdraft.
What will be the effect on the company’s capital gearing and current ratios?
Capital gearing Current ratio
A Increase Increase
B Increase Decrease
C Decrease Increase
D Decrease Decrease
I did not understand why the capital gearing ratio got increased
Thnx in advance..
Ask the Tutor ACCA MA
Measuring risk concept in performance measurement of MA
5y ago#1The gearing ratio includes long term loans, but does not include short-term borrowings (such as an overdraft).
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