The gearing adjustment in inflation accounting: The financing sequence assumption
South African Journal of Business Management
| Field | Value | |
| Title | The gearing adjustment in inflation accounting: The financing sequence assumption | |
| Creator | Van Hoepen, M. A. Lambrechts, I. J. Mostert, F. J. | |
| Description | The application of a gearing adjustment in inflation accounting has always resulted in the problem of determining a financing sequence. A decision has to be taken whether certain categories of assets are financed with equity and/or loan capital. Financial theory of the last few decades quite convincingly revealed that there are no logical grounds for relating certain assets to certain liabilities and/or equity. This proportional financing assumption is discussed and illustrated in the article for the so-called Van der Schroeff-system of income demermination in order to point out the sensitivity and financial consequences of this assumption for financial decision making. The assumption about the financing sequence does have a definite influence on the gearing adjustment. Further influences are on the income statement and the message given to shareholders and the investment public; the composition of the asset structure and consequently the risk composition of the assets; the composition of the financing structure and consequently the financial risk as portrayed by the balance sheet; and the marginal financing ratios needed to maintain the original gearing ratio. | |
| Publisher | AOSIS | |
| Date | 1989-09-30 | |
| Identifier | 10.4102/sajbm.v20i3.956 | |
| Source | South African Journal of Business Management; Vol 20, No 3 (1989); 163-167 2078-5976 2078-5585 | |
| Language | eng | |
| Relation |
The following web links (URLs) may trigger a file download or direct you to an alternative webpage to gain access to a publication file format of the published article:
https://sajbm.org/index.php/sajbm/article/view/956/896
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