[试题]

4 (a) A company may choose to finance its activities mainly by equity capital, with low borrowings (low gearing) or by

relying on high borrowings with relatively low equity capital (high gearing).

Required:

E.xplain why a highly geared company is generally more risky from an investor’s point of view than a company

with low gearing. (3 marks)

参考答案与解析:

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