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CIPS Exam L4M4 Topic 2 Question 35 Discussion
Actual exam question for
CIPS's
L4M4 exam
Question #: 35
Topic #: 2
[All L4M4 Questions]
Topic #: 2
Greg is doing some research on a potential supplier and is concerned that the supplier's funding is based on long-term debts and loans. Working with this supplier therefore might bring additional risks to Greg's business. What should Greg do about his concerns?
Suggested Answer:
D
Greg needs to use a gearing ratio. Gearing is a measure of how the business is being funded and is based on the ratio of debt to equity Gearing comes up a lot in the exam. Also make sure you know what Return on Investment, Acid Test and EBITDA are.
Return on Investment (ROI): How to Calculate It and What It Means (investopedia.com)
EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com)
Acid-Test Ratio: Definition, Formula, and Example (investopedia.com)
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