Gearing RatiosFood Beverage Manager

Debt ratio = Long-term debt / Capital employed (net assets) Measures the extent to which borrowed funds

have been used to finance the company’s net assets. The more long-term debt the higher is the

gearing & the greater the risk incurred. Gearing is generally considered to be high above

1:1

DEBT RATIO

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DEBT TO-EQUITY RATIO

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Debt-to-ratio = Long-term debt / Share capital Measures the funds provided by long term

creditors against the funds provided by shareholders.

Interest cover = Profit before interest & tax / Interest payable. Indicates the ability of company to meet its

annual interest costs. The higher the ratio the less risk is involved, as

the interest begin paid becomes a smaller proportion of the profit generated.

INTEREST COVER

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Earning per share = Profit after tax / No. of ordinary share issue Shows the after-tax earning generated tor

each ordinary share. High earnings per share can encourage new

investors and promote investor loyalty.

STOCK MARKET RATIOS

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Price – earnings = Market price per share / Earnings per share Shows the esteem in which the market holds

the company. The higher the ratio the more popular the share.

PRICE / EARNINGS

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Net dividend yield = Dividend per share / Market price per share

Indicates the dividend rate of returns to ordinary shareholders.

NET DIVIDEND YIELD

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Dividend cover = Earnings per share / Dividend per share

ORProfit to pay ordinary dividends / Ordinary dividends

Measures the extent to which the company pays dividends from earnings.

High dividend cover is healthy provided that investors judge the grow dividend on ordinary share to be adequate.

Low dividend cover may indicate that gross dividends to ordinary shares have been set too high.

DIVIDENT COVER

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Maximise sales

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