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I have seen some SOFP where preference shares are included in the equity and some others where they are included in long term debt. And in both cases, they did not specify what to include in the gearing ratio calculation. What should we do in this case?
Irredeemable preference shares are treated as equity. Redeemable preference shares are treated as debt.
If the question does not make it clear whether they are redeemable or irredeemable, then assume them to be irredeemable.
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