Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
a) Debentures are a source of external long term (loan) finance for which interest is paid to the debenture holder. Debenture holders do not usually have voting or ownership rights in the organisation.
b) Year 2
Year 1
250 ÷ 1,000
250 ÷ 800
= 25 %
= 31.25 %
Full working out compulsory for full marks
c) The gearing ratio is a long term liquidity ratio that calculates the percentage of a firm's capital employed that comes from long-term liabilities, such as debentures. JKL Ltd. has less than 50% gearing so is considered to be comparatively safe, given the limited information given.
The firm has lower gearing in Y2 meaning that it is less susceptible to any increases in interest rates, i.e. it represents less risk. However, there is a need to benchmark this ratio with the industry norm before any firm conclusions can be prepared about the organisation's liquidity position.
d) The costs and remuneration of high gearing should be considered. For example, having high gearing during times of rising interest rates is likely to be risky (even if the economy is doing well) as the higher loan repayments will obstruct the firm's working capital. However, high gearing might be essential for a firm that lacks internal funds to finance growth and evolution.
In the case of JKL Ltd. the fall in its gearing ratio is not essentially a good thing, e.g. can JKL Ltd. afford to have higher gearing to money expansion, particularly since it has higher net profit and retained profit in Y2.
Q. Evaluate Cost of Irredeemable Debt subsequent to tax? Cost of Irredeemable Debt subsequent to tax: - When a company utilizes debt as a source of finance then it saves a cons
Securitization -Source of financing whereby an entity's ASSETS (characteristically mortgage loans, lease obligations or other kinds of RECEIVABLES) are placed in a special purpose
Question 1 What are the total cash inflows for project A? Discount rate (%) NPV of A (Rs.) 0
Q. Scope of the content of the finance function? 1) Estimating of the finance requirement: the first task of a finance manager is to estimate and short terms and long terms fin
Assume that you have been consistently impressed by David and Tom Gardner of The Motley Fool since you first heard of their rather improbable rise to prominence in financial circ
Question : (a) A project must have a useful purpose. Therefore, as a project is evaluated, the team should determine the requirements of the local community and industry. These
Bonds are usually recognized by yields, which change from time to time owing to many market forces. There exists an inverse relationship between the bond price and the
Q. What do you mean by Variable working capital? Permanent or fixed: Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization
Explain the factors affecting the choice of a maximum cash balance amount. The maximum cash balance amount is defined by available investment opportunities, the expected return o
These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd