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gearing when equity is negative

This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.

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March 27, 2022 at 5:06 pm #652044
ABDULLAHI312
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Hi,
i got this confused. when the equity of an entity shows negative balance due to retained losses, what happens to the gearing? will we use negative equity and get negative gearing(preferably debt/equity)?
thanks
March 27, 2022 at 5:57 pm #652060
John Moffat
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You would show a negative figure, but it would be pretty meaningless. It doesn’t ever happen in the exam!
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