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Sir, in gearing ratio, when we say debt to total market value, does it mean debt to equity or debt to debt plus equity I looked up online but I found conflicting answers.
Which one should we use in exam?
Thanks
Gearing can be measured as either debt to equity, or as debt to debt plus equity. Obviously they do not give the same answer, but either measure is valid unless the exam specifies differently.
However, if the question specifies that it is to be measured as debt to total market value, then it means debt to debt plus equity (because total market value equals debt plus equity!).
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