3.5.2 Ratio Analysis

• Capital Employed = non-current liabilities + total equity
• ROCE = operating profit / capital employed x100
• Gearing = non-current liabilities / capital employed x100
• Gearing Ratio : measures the firm's level of debt and looks at the long term stability of a business

  • main ration for measuring the health of the business
  • shows how reliant a firm is on borrowing money and how vulnerable they are to financial set back
  • percentage of capital employed that is debt
  • low geared = less than 25%
  • normal = 50%
  • highly geared = over 50%