Gearing Ratio
Joannesetter
Registered Posts: 3
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
or
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?
Thanks!!
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
or
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?
Thanks!!
0
Comments
-
Debt/Debt+ Equity so 500,000+50,000/1,500,000+500,000+50,000
OR 550,000/2,050,000 = 0.26829... x 100 = 26.83%1 -
Thanks George, now I feel stupid.
Why is the over-draft included in this?
I thought it was only long-term debt that was meant to be included.
Thanks0 -
Not a problem.
If you scroll down a bit on this old post it's explained very well by SandyHood.
https://forums.aat.org.uk/discussion/32762/gearing-ratio-credit-management-and-controls-project
Hope this helps.0
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