Page 125 - APM Integrated Workbook STUDENT S18-J19

Financial performance measures in the private sector

2.4 Measuring risk

Also needs to be considered since measures the ability of the
organisation to meet its liabilities.

Measures

 Financial gearing = (long-term debt÷ shareholders’ funds) × 100.

or = (long-term debt÷ (long-term debt + shareholders’ funds))
× 100.

 Operating gearing = fixed costs ÷ variable costs.

 Interest cover = PBIT ÷ interest charges.

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