Question 1 Introduction
Capital gearing compares the non-current liabilities of a company to the total of equity and non-current liabilities, in order to determine the financial risks of the company.
Liquidity is a measure of the business's ability to meet the long-term obligations of its non-current liabiltities.
Depreciation of a non-current asset will decrease a business's liquidity.
An increase in the provision for doubtful debts will decrease a business's profitability.
Return on capital employed for a limited company is calculated as profit before interest divided by capital employed x 100.
Capital gearing compares the non-current liabilities of a company to the total of equity and non-current liabilities, in order to determine the financial risks of the company.
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