ACCT10001 Lecture Notes - Lecture 9: Debt Service Coverage Ratio, Issued Shares, Current Liability
27 Jul 2018
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Document Summary
Extent to which investment is financede by debt relative to equity. Extent to which the entity has used debt to finance its investments in assets. Debt is cheaper source of finance than equity. Measure of financial risk interest must be paid. Ability of entity to generate earnings to cover financing costs. Net financing costs = interest expense - interest revenue. Measures entity"s capacity to remain solvent in the longer term. Indicates number of years it would take to pay long-term debt at current operating level. Ratios relate to the number of shares issued or their market price. Measures book value of entity"s net tangible assets per ordinary share on issue. Intangible assets excluded unlikely to be realised upon liquidation. Ntab > share price company is either undervalued or the market has a pessimistic view about the realisable values of the tangible assets. Percentage of profits distributed as dividends to shareholders.
