- This topic has 1 reply, 2 voices, and was last updated 5 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- The topic ‘p4 O.T notes chaper 16 eg 3’ is closed to new replies.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › p4 O.T notes chaper 16 eg 3
Good day, I’m just wondering how the figure for Value of equity and Value of Debt was reached in example 3 chapter 16.
it say gearing ratio is 0.2. I thought this essentially meant that you could use equity as 80 and debt as 20. but the example stipulates that those values are 100 and 20 respectively.
I think I am missing something
Thank you
The example says that the ratio of debt to equity is 0.2.
So the debt/equity must equal 0.2. i.e. for every 100 equity, the debt must be 0.2 x 100 = 20.
(If you use 80 and 20, then the ratio is 20/80 which does not equal 0.2 🙂 )