Gearing ratio

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December 26, 2015 at 11:44 am #292755
azeeza247
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Which equation should be used?
Capital gearing =( long term debt/ shareholder funds) *100%
Or
Capital gearing =( long term debt/ shareholder funds+long term debt) *100% ?
December 27, 2015 at 9:32 am #292778
John Moffat
Keymaster
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Both formulae are standard measures of gearing.
If it is asked in the exam then you will be told which way to measure it.
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