Kiran is appraising some potential suppliers and has noticed that one of these suppliers has an extremely high gearing ratio.
What would this suggest?
A . the supplier is extremely profitable
B . the supplier has a lot of long-term debt
C . the supplier has a high cost of sales
D . the supplier has a strong return on investment
Answer: B
Explanation:
The correct answer is ‘the supplier has a lot of long-term debt’. Gearing is a measure of how the business is being funded and looks at the ratio of debt to equity. For example if they have taken out lots of loans and mortgages, this would equate to a lot of debt which means a poor gearing ratio. Gearing is a hot topic for the exam.
Latest L4M4 Dumps Valid Version with 120 Q&As
Latest And Valid Q&A | Instant Download | Once Fail, Full Refund