ocr: Safe Gearing Thelevel of sate gearing depends entirely on the degree of certainty with which the business pelieves it can depend upon its trading profits. Ifa business experiences large swings in trading profits trom year to year then its level ofsafe gearing will be relatively low. This iS because the pusiness is unlikely to be able to survive a trading period where profits are relatively low yet the fixed-interest payments on loan capital still have tol be made. Ift the business does not earn sutticient trading profits to pay its interest charges then the debenture holders may seek the windi ...
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