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Dear sir,
please tell me why does the kit some times mention debt/equity as ( long term debt+short term debt/equity) rather than simply as long term borrowings/equity. Is there a particular case where we should include the short term borrowings as well as long term borrowings?Also when do we use geometric average revenue growth rather than simple revenue growth?
Thankyou
Short-term debt is only included if there is an intention that remains in the long-term. In particular, although bank overdrafts are always recorded as current liabilities (per financial accounting), if the intention is for it to be used as a long-term source of finance, then it is included when measuring the gearing.
It is always the geometric mean when averaging growth rates – I explain this in my free lectures.
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