Answered: The gearing of a JK plc has reduced…

The gearing of a JK plc has reduced from 45% in 2020 to 37% in 2021. Answer TRUE or FALSE to indicate which of the following is/are VALID reasons for the decrease?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

The gearing of a JK plc has reduced from 45% in 2020 to 37% in 2021.
Answer TRUE or FALSE to indicate which of the following is/are VALID reasons for the
decrease?

(i) JK has entered into a new lease this year

(li) JK used some of its cash to purchase a significant amount of new plant in the 2021

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