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# Gearing Ratio Q HELP!

LynMillManc
Registered Posts:

**9**
Hi I'm really getting confused about the below question..i just cant seem to get the correct %.....

Current portion of long term loan 126

Loan term loan 945

Retained profit 4898

Share Capital 500

The answer given is 17% but using the formula below i just can't get it

long term liabilities (945)

divided by

long term liabilities (945) + Share capital (500) + retained profit (4898)

multiplied by 100

Gives me 15%

What am i doing wrong????

Thanks in advance!

Current portion of long term loan 126

Loan term loan 945

Retained profit 4898

Share Capital 500

The answer given is 17% but using the formula below i just can't get it

long term liabilities (945)

divided by

long term liabilities (945) + Share capital (500) + retained profit (4898)

multiplied by 100

Gives me 15%

What am i doing wrong????

Thanks in advance!

0

## Comments

219This is what the trial balance shows....maybe I'm being really really thick???

21Total debt 1071

Equity 5398

1071/ (1071+5398) = 0.1655

Round up 17%

Hope it's clearer now

219I hope it's clear as to whether I should calculate using the total debt or just long term debt as I thought the short term wouldn't be included in the gearing ratio.

21