Define about financial gearing, Financial Accounting

Assignment Help:

Q. Define about financial gearing?

As financial gearing raise the burden of interest payments increases and earnings become more volatile. Since interest payments should be met shareholders may be faced with a reduction in dividends at very high levels of gearing a company may cease to pay dividends altogether as it struggles to find the cash to meet interest payments.

The pressure to meet interest payments at high levels of gearing is able to lead to a liquidity crisis where the company experiences difficulty in meeting operating liabilities as they fall due. In severe cases liquidation may take place. The focus on meeting interest payments at high levels of financial gearing is able to cause managers to lose sight of the primary objective of maximizing shareholder wealth. Their major objective becomes survival and their decisions become focused on this rather than on the longer-term prosperity of the company. Essential investment in fixed asset renewal may be deferred or neglected.


Related Discussions:- Define about financial gearing

Explain the auditing standards, Q. Explain the Auditing Standards? Audi...

Q. Explain the Auditing Standards? Auditing Standards - Guidelines to which an AUDITOR adheres. Auditing standards encompassauditor's professional qualities, as well as her or

Calculated market capitalization, What have been the dividends per share? ...

What have been the dividends per share? What is the CAGR of dividends per share from 2008 to 2010? What was the retention ratio for 2008 to 2010? Calculate the DPS growth

Is the emergency center a wise use of the hospital''s , Consider a not-for-...

Consider a not-for-profit hospital faced with a familiar choice: to open or not to open an emergency center in a new suburban hospital shopping mall.  The mall's developers claim t

Prepare a cash budget for each of the first three months, Question : Th...

Question : The subsequent data pertain to a shop. The owner has made following sales forecasts for the first 5 months of the coming year.

Assingment, Can you do the attached quections by Monday?

Can you do the attached quections by Monday?

Prepare a trial balance and income statement, Cleaning Co. began business o...

Cleaning Co. began business on March 1, 2011. The company provides specialized cleaning services to corporate clients. Listed below are the transactions entered into by Cleaning Co

Partnership, in the absence of no agreement in partnership discuss and expl...

in the absence of no agreement in partnership discuss and explain the provision of partnership act

Schedule of cost of goods, The following information was taken from the led...

The following information was taken from the ledger of Jefferson Industries, Inc.: Direct labor $85,000 Administrative expenses $59,0

Explain about spring and forward loading, Q. Explain about Spring and Forwa...

Q. Explain about Spring and Forward loading? Spring loading - Timing of option grants to occur before good news or after bad news is released Concerns about insider trading

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd