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Hello ,can you please help me with this question? Thanks in advance
Purple Co has the following amounts on its statements of financial position at the year-end. Tangible NCA 133,750 Intangible NCA 15,800 Inventory 27,400 Receivables 17,430 Cash at bank and in hand 3,200 Bank overdraft 1,500 Trade payables 34,430 5 year bank loan 50,000 Provisions 5,700 What;s Purple Co’s gearing ratio? I know that gearing ratio is calculated as total long-term debt/share holders’ equity+total long-term debt. I know that long term debts here are =5year bank loan+provision=50,000+5,700 and share holders equity is equal to total assets minus total liabilities.So it must be 15,800+27,400+17,430+3,200-1,500-34,430-50,000-5,700. I think I calculate something wrong but can’t find what is wrongHave you not checked with the answer? You must surely have an answer in the same book in which you found the question!
You do not seem to have done anything wrong (although as you will know if you have watched my free lectures, the gearing ratio can be defined as either long-term debt / equity; or alternatively long-term debt / debt + equity. Exam questions make it clear which definition is required)
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