International finance Case Study Example | Topics and Well Written Essays - 750 words

International finance - Case playing field Examplehy debt to equity ratio for a business should be such that the equity is high than the debt, since it is solitary(prenominal) then, that a business can demonstrate its ability to correct its debts using its own resources, without borrowing outwardly (Tyran, 198638). However, the debt to equity ratio of NDP points to the fact that the friendships financial position is not healthy, since the company had a debt to equity ratio of 100% (Moffet & Adelson, 201144). This means that the companys debt is equal to the companys own resources and as such, should the financial crisis extend for long, the company cannot remain with any resources to continue its operations, since it would use all of its resources to pay up debts.The other pointer to the unhealthy financial status of the NDP is the high interest expense which the company is incurring. The increase in the debt levels of the company has a corresponding increase on the cost of capi tal, in ashes of the interest charges (Moffet & Adelson, 201144). Thus, considering that the interest expenses for NDP are systematically increasing, with the company having an interest expense of HK$102 by December 2008, solely the same increasing to HK$480 in millions by march 2009 (Moffet & Adelson, 201143). This simply means that the company is obtaining its capital at very high costs, which are then unhealthy for the operation of the company.The other issue that indicates that the financial status f NDP is not healthy is its boodle ratio. The earnings ratio measures the rate at which the business is up to(p) to generate revenues, after it has paid costs of generating the revenues, such as interests, taxes and depreciation of the assets applied towards generating the revenues (McClure, 2011n.p). For example the earnings of the NDP by September 2008, was HK$ 3,988 million, but the same had reduced to HK$ 2,049 million by March 2009, indicating that the revenues for the compan y were consistently reducing (Moffet & Adelson, 201143). This is a pointer