Gearing Ratio - What figure on the bottom?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi all,

In my textbook, the gearing formula is given as:

Long-term debt / Equity + Long-term debt x 100%

However, in the June 05 paper in section 2, it asks for a gearing calculation and when you look at the answer it has just used:

Long-term debt / Equity x 100%

Does anyone know which one you're supposed to use?

Thanks :D

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gearing Ratio - What figure on the bottom?

    ive been taught - long term debt / (long term debt + equity)x 100
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gearing Ratio - What figure on the bottom?

    For Gearing we havbe been told

    Loan Capital
    Capital Employed
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gearing Ratio - What figure on the bottom?

    For gearing we were taught

    Long Term Debt
    Capital Employed

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gearing Ratio - What figure on the bottom?

    Basically I'm just wondering whether or not to include long term debt in the bottom figure as well?

    (PS - Good luck 2moro everyone!) :D

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