1)may i know how to calculate debt ratio?
i) debt/ debt+equity
ii) total debt/ total asset
2)why scrip issue will result in fall in market price per share?
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debt ratio
11y ago#1or the gearing ratio it is debt / debt + equity
or debt / total assets less current liabilities
Both are the same. Total assets - current liabilities = equity + long-term debt
A scrip issue it the same as a bonus issue. So shareholders receive extra shares free. Because they are not paying in any more, the total value of the shares must remain unchanged. This means that if they have more shares, then the MV per share must be lower.
when it mentions debt ratio, what is its formula actually?
in Bpp textbook, the formula for debt ratio is total debt : total asset. debt ratio formula is different from the gearing ratio formula.
why it is total debt and total asset instead of long term debt/ total asset-current liabilty?
11y ago#4It is as I have written above!
why it is total debt and total asset instead of long term debt/ total asset-current liabilty?
11y ago#6Because it is long term debt as a ratio of total long-term finance.
Total long-term finance is the same as total assets minus current liabilities.
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