PEV - Gearing Ratio - June 2008 paper

Mathew_Hill

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

hfadkins19

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

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

long term loan / net asset

diamondavid

long term loan / fixed asset + current asset - current liab