5
Financial position
What topics are covered in this chapter?
- Why financial position is critical
- What is the company’s financial position?
- Gearing – the debt/equity ratio
- Pension deficits and other liabilities
- Interest cover and other measures of financial strength
- Credit ratings
- Covenants
- Why high gearing may hurt the company and its share price
- How much debt should the company have? Efficient balance sheets
- Raising fresh capital: rights issues
- Cash flow
- Summary
- Checklist
Why financial position is critical
As the current financial environment has made abundantly clear, the level of debt in a company (often referred to as ‘gearing’ or ‘leverage’) is a key element of risk – and, as we have seen, financial risk is a key driver of valuation. ...
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