Gearing Calculation Help Neeeded

Nicola1106

I am looking for some help on the calculation of gearing.
I have attempted the June 2008 paper PEV, but can not come to the right answer.
Unfortunetly i do not go to college any longer so i can not ask a tutor for advise.

Please help... Exam in 2 weeks!

Richard

Gearing is about measuring how much of the company is financed by debt, so the ratio is debt/capital employed x 100%.

An alternative is to use debt/equity x 100%.

visha

Richard is right

look at the following calculations. it may help

long term borrowing (LT)................... 12000 ..............11300

equity..............................................8400 ..............8400
Capital EMPLOYED (CE).....................20400 ..............19700

Gearing 1 LT/CE................................58.82 ..............57.36

Gearing 2 LT/Equity,,,,,,,,,,,,,,,,,,,,,,,,,,,,,1.43 ...............1.35

SandyHood

I recommend that you stick to long-term loans as a % of the total capital employed.
The PEV examiner will ask for debt:equity ratio if he ever wants that (but I think it is most unlikely)

Suzie1982

Hey guys

Imgetting stuck on the gearing ratio too so ure help has been fantastic.

Thanks

Suzie