In general, analysts use three ratios to assess the strength of a company's capitalization structure. The first two are popular metrics: the debt ratio (total debt to total assets) and the debt-to-equity (D/E) ratio (total debt to total shareholders' equity). However, it is a third ratio, the capitalization ratio—(long-term debt divided by (long-term debt plus shareholders' equity))—that delivers key insights into a company's capital position.
With the debt ratio, more liabilities mean less equity and therefore indicate a more leveraged position. The problem with this measurement is that it is too broad in scope and gives equal weight to operational liabilities and debt liabilities.
The same criticism applies to the debt-to-equity ratio. Current and non-current operational liabilities, especially the latter, represent obligations that will be with the company forever. Also, unlike debt, there are no fixed payments of principal or interest attached to operational liabilities.
On the other hand, the capitalization ratio compares the debt component to the equity component of a company's capital structure; so, it presents a truer picture. Expressed as a percentage, a low number indicates a healthy equity cushion, which is always more desirable than a high percentage of the debt.
6 H Q4. (25 marks) Imagine you are planning to raise capital for the firm, you...
Q4. (25 marks) Imagine you are planning to raise capital for the firm, you are wary about the lender and shareholders, which accounting ratios could address the concerns of those stakeholders? Explain in detail.
Q4. (25 marks) Imagine you are planning to raise capital for the firm, you are wary about shareholders, which accounting ratios could address the concerns of those stakeholders regarding efficiency of the assets and cashflow? Explain in detail.
Imagine you are planning to raise capital for the firm, you are wary about the lender and shareholders, which accounting ratios could address the concerns of those stakeholders? Explain in detail.
Imagine you are planning to raise capital for the firm, you are wary about shareholders, which accounting ratios could address the concerns of those stakeholders regarding efficiency of the assets and cashflow? Explain in detail.
Q4. (25 marks) Imagine you are planning to raise capital for the firm, you are wary about shareholders, which accounting ratios could address the concerns of those stakeholders regarding efficiency of the assets and cashflow? Explain in detail. I Q1. (25 marks) Calculation of and journal entries for impairment of goodwill Gandah Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash generating under IFRS. Management is...
Q4. (25 marks) Explain the different method of Bonds and Investment Accounting we have done in class. If you start your own private company and wish to raise capital, what ratios should you consider important?
please explain it thoroughly Q4. (25 marks) Explain the different method of Bonds and Investment Accounting we have done in class. If you start your own private company and wish to raise capital, what ratios should you consider important?
Q4. (25 marks) Explain the different method of Bonds and Investment Accounting we have done in class. If you start your own private company and wish to raise capital, what ratios should you consider important? о
5 Header Q4. (25 marks) 1 Imagine you are investing in a company having more than 30% of investment and you feel the need to update the accounting books, what accounting approach would you use? Your investment is $1 million and the accounting year ends on December 31* 2019, the fair value of the investment goes up to $1.3 million on that date. How would you record in your books? 6 Header
Q4. (25 marks) Imagine you are investing in a company having more than 30% of investment and you feel the need to update the accounting books, what accounting approach would you use? Your investment is $1 million and the accounting year ends on December 31st 2019, the fair value of the investment goes up to $1.3 million on that date. How would you record in your books?