Analysing the existing internal position of a business: Practice Questions

Elkington's Triple Bottom Line suggests that a business should measure its performance based on which three areas?

A company's financial records show non-current liabilities of \( \$4.5 \) million and total equity of \( \$3.0 \) million. Calculate the gearing ratio and evaluate the risk level.

A business decides to reclassify some of its short-term debt as long-term debt just before the end of the financial year. This practice is an example of window dressing. What is the most likely intended effect on its financial ratios?

In Kaplan and Norton's Balanced Scorecard, which perspective is specifically concerned with measuring the efficiency of internal processes and the lead time for product development?

Explain how a high gearing ratio might be interpreted as an internal weakness for a firm during a period where the central bank significantly increases interest rates.

A mid-sized manufacturing firm, 'Precision Engineering', provides the following data from its recent financial statements:
- Current Assets: \( \$120,000 \)
- Current Liabilities: \( \$80,000 \)
- Non-current Liabilities (Long-term Loans): \( \$250,000 \)
- Total Equity: \( \$150,000 \)

(a) Calculate the Current Ratio and the Gearing Ratio for Precision Engineering.
(b) Evaluate the internal position of the business based on these ratios, specifically addressing its liquidity and long-term financial risk.