Mathematics · Ratio Analysis
A company borrows $10,000 repayable in five years' time and immediately uses the entire loan amount to repay its bank overdraft. What will be the immediate effect on the company's capital gearing ratio and current ratio?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Capital gearing decreases; Current ratio decreases
- 2Capital gearing decreases; Current ratio increases
- 3Capital gearing increases; Current ratio decreases
- 4Capital gearing increases; Current ratio increases✓
Correct answer
Capital gearing increases; Current ratio increases
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