Gearing Ratio

Hi All,

If someone could help on the below please!

Task 7 in the AAT Cash and Treasury Management practise assessment is a question on gearing ratios which I just cant figure out.

The question is: A company has a 5 year loan of £500,000 and an overdraft of £50,000. Shareholders funds amount to £1,500,000. what is the gearing ratio?

I have been trying to use the following:
long term debt/equity
long-term debt/equity + long term debt

The answer should be 26.83% but I cannot get to this whatsoever!

can someone shed some light?



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