Section B:

Question 4

“Operational gearing is of interest not only to managers, but also to investors, since it may affect their investment decisions. While they may have a view on an appropriate level of operational gearing for a company based on their understanding of its business, they cannot confirm that view, since it’s not possible to calculate a reliable gearing ratio from published accounts.” (Steven, 2006)

Required:

Critically discuss the above statement.