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gearing ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › gearing ratio

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 21, 2018 at 9:20 am #492420
    nsrin
    Member
    • Topics: 25
    • Replies: 13
    • ☆

    HI
    I have a question in multi choice questions chapter15 there was these question ” what is the effect of write off inventory on GEARING RATIO . the correct answer was ” INCREASE”. I CAN’T understand why increase ? could you help me?

    thanks a lot

    December 22, 2018 at 7:55 am #492484
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    Writing off inventory reduces the profit, which therefore reduces reserves and therefore reduces the total equity. Less equity means the gearing ratio increases.

    December 22, 2018 at 5:47 pm #492519
    nsrin
    Member
    • Topics: 25
    • Replies: 13
    • ☆

    THANKS A MILLION

    December 23, 2018 at 3:16 pm #492547
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘gearing ratio’ is closed to new replies.

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