Gearing ratios

These measure the financial risk of a firm (the probability that a firm will not be able to pay up its debts). The more debts a business has (non owner …

LIMITATIONS OF RATIOS

he following limitations are inherent in the use of ratios: – 1. Historical information. Ratios are computed from past statements thus giving historical information which may be irrelevant for future …

USES OF RATIOS

Ratios can be used in the following ways: – 1. To evaluate the ability of a firm to meet short-term maturing financial obligations as and when they fall due (liquidity …

DEBENTURE LOANS

The term debenture is used when a limited company receives money on loan, and certificates called debenture certificates are issued to the lender. They are also called loan stock or …

SHARE CAPITAL OF A COMPANY

The owner’s interest in a limited company consists of share capital. The share capital is divided into shares. A share is the smallest unit of ownership in a company. The …

COMPANY ACCOUNTS

Limited companies come into existence because of the growth in size of business and the need to have many investors in the business. Partnerships are not suitable for such businesses …

RETIREMENT OF PARTNER

When a partner retires (i.e.) leaves the firm and the others partners are left to continue with the business then the retirement marks the end of one partnership and the …