Profitability Ratios: Short Term Liquidity Essay Sample
- Pages: 2
- Word count: 405
- Rewriting Possibility: 99% (excellent)
- Category: economics
Get Full Essay
Get access to this section to get all help you need with your essay and educational issues.Get Access
Introduction of TOPIC
Planning is very important to companies and firms, they need to analyze their various ratios and from that they are able to draw conclusions and make predictions for the long run. Financial planning is a process where accountants estimate the capital needed and they determine who their competition is. There are various ratios that are needed in order to determine how a company is doing financially. These include the following: profitability ratio, short term liquidity & efficiency ratio, working capital, long term solvency and shareholder ratios. This report will focus on the long-term solvency and shareholder ratios for Asos Ltd. Since there was a lack of data it was impossible to calculate the gearing ratio, interest cover, return of equity and the dividend payout ratio. Therefore this report will discus what the terms mean and why the ratios are missing.
Many companies need to borrow money in order to
What does Gearing Ratio mean?
The gearing ratio is a term that is used to describe a financial ratio that compares the owner’s equity or capital that comes from borrowed funds. Gearing is essentially a measure of financial leverage, it demonstrates the amount to which a firm’s activities are funded by the owner’s funds against the creditor’s funds.
As outsiders looking at a set of accounts we therefore want to assess how big that risk is, and to do this we use another ratio. This ratio is known as the GEARING RATIO.