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In a question where they ask to calculate MV based gearing defined as prior charge capital/equity?
For equity they didn’t take reserves?? why is this
kaplan exam kit q90If you are using market value then this effectively already includes the reserves.
(The most obvious reason for the market value being higher than the nominal value is that the business has been retaining profits.)This is dealt with in our free lecture on capital structure and ratios.
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