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Hi,
what does this term mean?
gearing defined as prior charge capital/equity, using market value based? and gearing defined as prior charge/equity using book value based?
what is included in debt? :S (preference, loan, bonds)
Its one of the two normal definitions used for gearing (the other is prior charge capital / (prior charge capital + equity))
Prior charge capital is preference shares; bonds; bank loans; bank overdrafts (if intended to be long term).
Market value based means using the total market values for all of them – and, of course, for equity (and this is the best way of measuring gearing). Book values based means using the values in the Statement of financial position for all of them.
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