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Operational gearing ratio followup

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Operational gearing ratio followup

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by AvatarJohn Moffat.
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  • April 11, 2018 at 11:38 am #446158
    Avatarhumai
    Participant
    • Topics: 757
    • Replies: 248
    • ☆☆☆☆☆

    1)Sir there was an MCQ in kit that which of the following would be implied by a decrease in company operating gearing ratio. And the answer was company has profits which are less sensitive to changes in sales volume. Can you please explain me this? And here it was not mentioned that from which formula they were calculating operational gearing ratio

    2)If fixed cost is higher then operating gearing (not the operating gearing ratio) will also be higher na?

    April 11, 2018 at 1:16 pm #446170
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54846
    • ☆☆☆☆☆

    1. The question is wrong not to say how the ratio is calculated.

    2. Yes (if higher relative to variable costs).

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