REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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Gearing
definition
In general,
the Gearing figures within Company REFS are calculated
by dividing borrowings by shareholders’ funds, over different
periods of maturity, and expressing the result as a percentage.
However, the gearing figure itself provides an incomplete picture
if the effect of intangible assets is ignored. In order to ensure
that the impact of any intangibles is shown, Company REFS
provides two gearing figures alongside each of the headings
in the table.
The left-hand
column shows each variable, expressed as a percentage of shareholders’
funds including intangibles, i.e. before deducting intangible
assets. The right-hand column shows the same variable, but expressed
as a percentage of shareholders’ funds excluding intangibles,
i.e. after deducting intangible assets.
Gearing is
not calculated when shareholders’ funds are negative, and this
condition is indicated by the abbreviation ‘neg’.
Definition
of intangibles
Intangible
assets include goodwill, brand names, patents and publishing
titles. They possess the following attributes:
non-physical in nature
capable of producing a future economic benefit
protected by a legally recognised, or de facto, right
capable of being separately identified
capable of being objectively valued
The categories
of intangible asset most frequently observed are:
Purchased goodwill (i.e. the difference between the price paid
for a
business
and the values attributable to its underlying tangible assets)
Brands (e.g. product brand names, trademarks, corporate names,
consumer
goods brands)
Publishing rights (e.g. magazine titles, books, newspaper mastheads,
film
rights, music
rights)
Intellectual property (e.g. patents, copyrights, technology,
software,
knowhow)
Intellectual property (e.g. patents, copyrights, technology,
software,
knowhow)
Licences (e.g. TV and radio licences, airline take-off and landing
slots,
franchises,
distribution rights)
Definition
of shareholders’ funds
Shareholders’
funds including intangibles are defined as follows:
ORDINARY
SHARE CAPITAL
+ PREFERENCE
SHARE CAPITAL
+ RESERVES
Shareholders’
funds excluding intangibles are defined as follows:
ORDINARY
SHARE CAPITAL
+ PREFERENCE
SHARE CAPITAL
+ RESERVES
- INTANGIBLE
ASSETS
(NOTE:
For the purpose of gearing calculations, any preference capital
redeemable within 12 months is classed as borrowings.)
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