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Hi Mr.John
I have a misunderstanding about the formula which was written in your lecture.
Gearing = Long term debt / Capital employed( equity+long term debt)
but in your lecture it was given as = long term debt/ equity (only)
why didn’t you add long term debt to the equity?Gearing can be measured in either of two ways.
Either debt / (debt + equity) or alternatively as debt / equity.
Both are standard measures of gearing (and I explain this in the lecture) and in the exam the examiner will make it clear which of the two he requires.
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