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Financial Management Question (1 Viewer)

reggie7

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Okay so we got this multiple choice question in our Trial Exam and we're having a postmortem. This question has caused debate:

The following includes ratios of Bill's Pet Shop for 2008 and 2007:



Gearing ratio --- 0.5:1 (2008) 1.3:1 (2007)
Expenses ratio --- 37% (2008) 22% (2007)


Describe the store's financial position in 2008 compared to 2007.

(a) Low Solvency & High Efficiency
(b) High Solvency & High Efficiency
(c) Low Solvency & Low Efficiency
(d) High Solvency & Low Efficiency

If possible I'd like a number of answers and opinions please because I lost a mark for this and I'd like to describe to the teacher the correct answer.
 

baraka003

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a.
gearing has improved? for every dollar of equity finance there is 50 cents of debt finance and im guessing a higher efficiency ratio is more beneficial thus high efficiency
 

Michaelmoo

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a.
gearing has improved? for every dollar of equity finance there is 50 cents of debt finance and im guessing a higher efficiency ratio is more beneficial thus high efficiency
You're right. Gearing has improved. Efficiency hasn't though, a higher expense ratio means a greater proportion of sales goes to expenses. The answer is d.
 
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nimssyk

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Yeh its D

Becasue the Solvency was originally

$1.3 of debt to every $1 of equity

now its just 50c to $1 --> which means the business has become more solvent.

But efficiency wise in 2007

22% of the value of sales was expenses.

this has now gone up tp 37% --> which means efficiency has fallen


So def D
 

katie tully

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Yeh its D

Becasue the Solvency was originally

$1.3 of debt to every $1 of equity

now its just 50c to $1 --> which means the business has become more solvent.

But efficiency wise in 2007

22% of the value of sales was expenses.

this has now gone up tp 37% --> which means efficiency has fallen


So def D
yeah im 50 away from dbl gold but this has set me back 200 points

devestating tbh imo

not rly

lol @ this email i got, breaking has a virus

Hey
How are you these days? I bought one apple iphone 3gs black from this website china big wholesaler of brand electronics to my surprise,it's original,but much cheaper.You can check it,Hope everything well.
Regards
matt
 

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