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in gearing question one activity did gearing including retained earnings (equity + retainted earning),
another did prior charge capital/Equity, in this one ‘reserves’ are not included into equity. Why
is there any difference in retained earnings and reserves?Retained earnings are reserves.
If we are calculating the gearing using book values, then equity is share capital plus reserves.
If, on the other hand, we are calculating the gearing using market values, then equity is the market value of the shares (which effectively already includes the reserves).
I do explain this in my free lectures on gearing.
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