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Hi my dear tutor, I have a question.
finance raised 2000
under equity and debt method calculation profit is 1249 and 1124
given profit after tax-1000
given retained earnings-5488
ordinary shares-2500
long term liabilities-4500debt to equity calculation
(4500/5488+2500+2000)*100%=45.1
if my new profit after tax is 1249 and 1124 why i still use 5488 ?I can adjust it by adding 1249 under equity method and 1124 under debt method over 5488?
Need explanation
The examiners answer is looking at the immediate effect on the gearing.
If you want to look at what the effect will be in a years time (which is what you are suggesting), then no problem. The discussion would be the same.
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