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gearing when equity is negative

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › gearing when equity is negative

  • This topic has 1 reply, 2 voices, and was last updated 3 months ago by John Moffat.
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  • March 27, 2022 at 5:06 pm #652044
    ABDULLAHI312
    • Topics: 82
    • Replies: 68
    • ☆☆

    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
    Keymaster
    • Topics: 57
    • Replies: 49595
    • ☆☆☆☆☆

    You would show a negative figure, but it would be pretty meaningless. It doesn’t ever happen in the exam!

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