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Financial gearing measures the proportion of long-term debt capital relative to equity finance. Operational gearing is a measure of contribution to the total costs of sales. (Contribution is sales minus the variable cost of sales.) Which of the following is the highest-risk gearing profile for a company? A. Debt capital is a low proportion of long-term debt and variable costs are a low proportion of the cost of sales and sales revenue. B. Debt capital is a high proportion of long-term debt and variable costs are a high proportion of the cost of sales and sales revenue. C. Debt capital is a high proportion of long-term debt and variable costs are a low proportion of the cost of sales and sales revenue. D. Debt capital is a low proportion of long-term debt and variable costs are a high proportion of the cost of sales and sales revenue. |