Financial Objectives (AQA A-Level Business): Quizzes
📚Quizzes
Practise the questions
10 questions from this quiz
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Practise the questions
10 questions from this quiz
What does a business's capital structure describe?
What does a business's capital structure describe?
How it finances long-term operations
What two components make up long-term capital?
What two components make up long-term capital?
Equity and borrowing
What is the formula for calculating the gearing ratio?
What is the formula for calculating the gearing ratio?
(Loan capital ÷ total capital) × 100
What gearing ratio percentage typically indicates high gearing?
What gearing ratio percentage typically indicates high gearing?
Above 50%
What does low gearing (below 50%) generally represent?
What does low gearing (below 50%) generally represent?
A safer financial position
What financial risk does higher borrowing create?
What financial risk does higher borrowing create?
Greater interest repayment obligations
How do rising interest rates affect highly geared businesses?
How do rising interest rates affect highly geared businesses?
Increased costs and reduced profit margins
Why are luxury goods businesses particularly affected by high gearing?
Why are luxury goods businesses particularly affected by high gearing?
Cost rises can force price increases
What is the purpose of setting a target gearing ratio?
What is the purpose of setting a target gearing ratio?
To maintain financial stability
What must businesses balance when managing capital structure?
What must businesses balance when managing capital structure?
Lower cost of debt vs financial risk