- This topic has 3 replies, 2 voices, and was last updated 13 years ago by
.
- Posts
Sir, my question is silly, still I want to ask as to clarify my concept.
Aren’t current liabilities , from debt borrowing??
if not, please explain why.and what are the components of debt borrowing?
Debt borrowing refers to long-term borrowing – non-current liabilities.
A company can raise long term capital from shareholders of from long-term debt. Gearing is measuring what proportion of the borrowing is from long-term debt.
(Overdrafts have a question mark. Although they will always be classed as current liabilities, if the intention is to continue it for the long-term, then it will be included in the gearing ratio. The best in the exam is to calculate the gearing ratio with and without the overdraft, and then write about it. As you will know, 50% of the exam is proving that you understand what you are doing (and have not just learned formulae), and it is checked by having 50% of the exam being writing and not calculations.)
- You must be logged in to reply to this topic.