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Good day
Always I have this question and can’t find an answer anywhere.
Why during calculation of financial gearing in some answers to the questions uses equity capital including reserves, in some questions not include reserves?Thank you.
Unless told to do otherwise, gearing should always be based on market values. In which case the reserves are not relevant (the most obvious reason that the market value of equity is higher than the nominal value is because of the reserves – the market value effectively already includes them).
If the question says to use Statement of financial position values, then the value of equity is the nominal value plus the reserves.
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