Look back to Example 6.3 and Activity 6.18 (pp. 186187). What is the effect of financial gearing

Question:

Look back to Example 6.3 and Activity 6.18 (pp. 186–187). What is the effect of financial gearing on the return on ordinary shareholders’ funds (ROSF) when changes occur in the level of operating profit?

Data from Activity 6.18

Assume that the operating profit is £70,000 rather than £50,000. What would be the effect of this on ROSF?

Data from Example 6.3

The long-term capital structures of two new businesses, Lee Ltd and Nova Ltd, are as follows: 1 ordinary

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Accounting And Finance For Non Specialists

ISBN: 9781292334691

12th Edition

Authors: Peter Atrill, Eddie McLaney

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Question Posted: Dec 24, 2023 04:43 AM

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Look back to Example 6.3 and Activity 6.18 (pp. 186187). What is the effect of financial gearing

Question:

The long-term capital structures of two new businesses, Lee Ltd and Nova Ltd, are as follows: £1 ordinary shares 10% loan notes Lee Ltd £ 100,000 200,000 300,000 Nova Ltd £ 200,000 100,000 300,000

Step by Step Answer:

Financial gearing makes ROSF more sens...View the full answer

Accounting And Finance For Non Specialists

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