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1.Gearing ratio is calculated using value of debt and value of equity, what can consist of value of equity?, what if reserve are negative?
2. ROCE is calculated by PBIT and capital employed, my question is if capital employed consist of negative reserve than?
E.g. Emirates Airline Annual Accounts shows negative reserve, shall I take account of negative reserve in both of the above ratios while calculating or ignore it.
3.How can I know Last year share price of a firm?
Need Help Please. Thanks
The gearing ratios is most sensibly calculated using market values of debt and equity, and so the possibility of a negative does not arise.
Capital employed includes debt, and so if it were negative the company would be completely insolvent. If that is the case with Emirates, then it is because Emirates is an unusual company! You would not have that situation in the exam.
Also, the only purpose of any ratios is to assist with measuring the performance of the company. If ROCE was meaningless (because of the above) then you would not consider it and would look at other measures instead.With regard to last years share price – usually you can find share price history on the company’s website (in the investors section). Otherwise all I can suggest is to search the web with Google or the like.
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