it will be deteriorated further to 60% if £ 5 million debt is taken from the bank. It can give rise to financial risk
majorly the company might not be able to meets its current or future debt obligations in form of high interest rates payments along with principal. It will also harm the profitability and in turn the company’s ability to declare and pay dividends which fortunately it is paying in both recent years. Excessive financing can also inhibit additional investment into the company’s business. The interest cover ratio is needed to be high to indicate the number of times the company is able to disburse interest payments. By issuing more debt will weaken the interest cover ratio. Debt to equity ratio of 61% is highly recommendable and is also better than the current state however additional financing is strictly not recommended.