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Measuring risk concept in performance measurement of MA

This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.

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July 12, 2021 at 4:44 pm #627546
jithendra
- Topics: 1
- Replies: 4
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..
July 13, 2021 at 8:39 am #627586
John Moffat
Keymaster
- Topics: 57
- Replies: 49603
The gearing ratio includes long term loans, but does not include short-term borrowings (such as an overdraft).
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