Help with the practice Assesment 2 for gearing ratio

Paulasw1Paulasw1 Registered Posts: 23
hi, Can anyone help me with the task 4 from the Assessment 2 how to figure out the % of Gearing ratio. The answer is 233.80% in 20X5.

Comments

  • Rusty1985Rusty1985 Registered Posts: 55
    Hi Paula,

    Can you type the question and then we can have a look, or advise on the figures you used? Initially did you ensure you added the Non-Current Liabilities back in the formula? Depending on the scenario, some current liabilities are used in gearing formula (but it should say in the question if thats the case), also I would revisit the equity, you may have missed a figure which is why the gearing % is so high.

    Non current liabilities
    ---------------------------- X 100
    Non current liabilities + Total Equity
  • Paulasw1Paulasw1 Registered Posts: 23
    Hi its a written question...
    Both long term and short term borrowing have increased. The gearing ratio has increased to (233.80 %) in 20x5
    where : short borrowing is 2750 in 20x5 and 2590 in 20x4, long borrowing 21500 in 20x5 and 19800 in 20x4, total equity 10372 in 20x5 and 10965 in 20x4.
    really i dont know why is 233.80%
  • Clintm15Clintm15 Well-Known FarehamRegistered Posts: 247
    edited August 29
    A gearing ratio just compares debt to equity by applying the ratio debt/equity.

    So in this case:

    (short borrowing is 2750 + long borrowing 21500) / total equity 10372 = 233.8%
    AAT
    Level 2 - 2011
    Level 3 - 2012
    Level 4 - 2013

    ACCA
    F4 - Corporate Law - Dec 2015 (passed)
    F5 - Performance Management - Dec 2014 (passed)
    F6 - Taxation - Dec 2013 (passed)
    F7 - Financial Reporting - Jun 2014 (passed)
    F8 - Audit & Assurance - Dec 2015 (passed)
    F9 - Financial Management - Jun 2015 (passed)
Sign In or Register to comment.