Question:Which of the following would cause a company's gearing ratio to rise?
A. A decrease in long-term loans is less than a decrease in shareholders' funds
B. A decrease in long-term loans is more than a decrease in shareholders' funds
C. Interest rates rose
D. Dividends were paid
The correct answer is:A decrease in long-term loans is less than a decrease in shareholders' funds.
Long-term loans raise gearing, shareholders funds reduce it.
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