Gearing Ratio

fpettifer

Hi,
Need a little help with gearing ratios please? Can't figure out how they've got that answer in PEV June 2007 exam?!!?

The FTC book didn't have a calculation for this in it, however found one in the Unit 15 pocket notes book (really helpful!) but can't get the figures they've got.

Thanks
F. :confused1:

bigmuggsy

The gearing ratio in PEV 07 is (for scenerio 1);

Long Term Borrowing / Net Assets x 100

so the answer is

754/971 x 100 = 77.65%

Hope this helps

confused!!

Hiya

we were just taught that it was debt/equity
I find that quite easy to remember!!

visha

there are two calculations for gearing

1 debt divide by equity

2 debt divide bt capital employed(debt + equity)

see the following excellent website

http://tutor2u.net/business/presentations/accounts/gearing/default.html

fpettifer

I couldn't figure out how they got 43.71% in June 2007 exam?

visha

The fourmula that has been used is:

The debt divide by capital employed (debt+equity) times 100

therefore debt = 754
plus equity......= 971
total..............=1725

754/1725 x 100 = 43.71%