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Answer to 1a states that the gearing ratio is 29% although the only way i get that is if i divide the Shareholder funds by th long term liabilities although as per the ration it should be the other way around in which case it would give a very high gearing.
Could you please advise?
The normal way to calculate gearing is either:
Long term liabilities/Shareholders’ funds
Long term liabilities/(Shareholders’ finds + long term liabilities).
I don’t know whose mock exam you are using. ONA is an old P3 question (possibly adapted for SBL). In an old Kaplan Kit, in the answer, the gearing ratio for 20X6 is quoted as 71.13%
= 616(/616 + 250) = 71.13%