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The issued shares are $1 so isnt that the share capital as well? for calculating equity in gearing why cant i do share capital + retained earnings
When using the MV of equity, we do not add on the reserves because the MV effectively includes them. The most obvious reason for the MV being higher than the nominal value is because the company has been making profits.
oh so always in the exam i should calculate gearing using the market values not the book values?
Yes, unless the question specifically asks you to use book values (which would only be in a ratio analysis question and even then would be unlikely). Using book values is pretty meaningless 🙂
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