PEV - Gearing Ratio - June 2008 paper

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Mathew_Hill
Mathew_Hill Registered Posts: 23 New contributor 🐸
in AAT Level 4 (Level 8 in Scotland)
Hi everyone

Just doing some last minute PEV revision and have come across a gearing ratio in the June 2008 paper.

It's strange because the gearing ratio isn't even in my BPP PEV text book!

I have looked at the answer but have no idea how it was calculated. Has anyone done this one and know how the answer was calculated?

Many thanks

Matt

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  • hfadkins19
    hfadkins19 Registered Posts: 12 New contributor 🐸
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    Hello
    The gearing ratio is featured in the DFS textbook and we've been told by our college that we should learn all the indicators assessed at level 4, this includes gearing and interest cover.
    For the answer i got Debt / Equity = 12,000,000 / 8,400,000 = 1.43:1 or 143% (which is AAT's alternative answer) for scenario 1 and 11,300,000 / 8,400,000 = 1.35:1 or 135% for scenario 2.
    Hope this helps. Helen
  • Mathew_Hill
    Mathew_Hill Registered Posts: 23 New contributor 🐸
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    Thanks for that Helen

    Yeah, I can see that now.

    I have no idea how they came to the 58.82% as in the answer they have, but I guess as long as we have the alternative answer then thats good enough!

    Thanks again

    Matt
  • diamondavid
    diamondavid Registered Posts: 33 Regular contributor ⭐
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    long term loan / net asset
  • diamondavid
    diamondavid Registered Posts: 33 Regular contributor ⭐
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    long term loan / fixed asset + current asset - current liab

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