15% debentures 20X4 – 20X7 (5.0) ____ 15.0 ==== Capital and reserves Ordinary shares (25p par value) 5.0 Reserves 10.0 ____ 15.0 ==== Required (a) Calculate appropriate gearing ratios for Newsam plc using: (i) book values; and (ii) market values. (3 marks) (b) Assess how close Newsam plc is to breaching the debenture covenants. (3 marks) (c) Discuss whether Newsam plc‟s gearing is in any sense „dangerous‟. (4 marks) (d) Discuss what financial policies Newsam plc might adopt: (i) in order to lower its capital gearing; and (ii) to improve its interest cover. (10 marks) (Total: 20 marks) CHAPTER 7 – RATIO ANALYSIS 114 STOCK MARKET RATIOS Earnings per share (EPS) Example 6
15% debentures 20X4 – 20X7 (5.0) ____ 15.0 ==== Capital and reserves Ordinary shares (25p par value) 5.0 Reserves 10.0 ____ 15.0 ==== Required (a) Calculate appropriate gearing ratios for Newsam plc using: (i) book values; and (ii) market values. (3 marks) (b) Assess how close Newsam plc is to breaching the debenture covenants. (3 marks) (c) Discuss whether Newsam plc‟s gearing is in any sense „dangerous‟. (4 marks) (d) Discuss what financial policies Newsam plc might adopt: (i) in order to lower its capital gearing; and (ii) to improve its interest cover. (10 marks) (Total: 20 marks) CHAPTER 7 – RATIO ANALYSIS 114 STOCK MARKET RATIOS Earnings per share (EPS) Example 6
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