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I found some of the ratio done by examiner gaves different figures than I did. I actually can’t figure out how to do these numbers correctly now. could anyone help with it?
for december 2009 q1,
I did gearing ratio by interest bearing borrowing/ total equity. 200/ (5100+550):).5%
However examiner’s answer is 3.8%sales revenue to capital employed I did mine by revenue/equity 22000/(5150+550):).89 but examiner’s answer is 3.76.
please help,
Many thanks,
Getting the ratios accurate is not important. As long as you know how to apply the formula and more importantly how to interpret the formula then you will do very well.
Dear , As for the revenue to the capital employed ratio , there is something you need to know , capital employed at its simplest is total assets less current liabilities , or in other words , Non current assets plus the working capital , there are other ways to derive it as well , using this will give you the same result as the examiner’s .
Where as for the gearing ratio , I believe you are doing correctly , because for the gearing ratio to be equal to 3.8 % , equity needs to be 5263 ( 200 / 0.038 ) provided the long term borrowing figure is right or the long term borrowings would need to be 214.7 ( 0.038 * 5650 ) provided the equity figure is correct , both these figures do not appear in the financial statements , so simply apply this ratio on some other question to know that you are doing it the right way and move on .Hey
Debt Equity ratio can be done in 2 ways
1. Debt/equity
2. Debt/(debt+equity) . Here, equity does not include reserves(only equity and not shareholder’s fund)
Use the 2nd option while u do ACCA exam
DEC 2009 Q1. =200/(5100+200):).77%:).8%Capital employed is Net Assets i.e Total Assets less current liabilities.
Or Shareholder’s fund and Long term liabilities
Capital employed should include the long term capital
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