Using the formula gearing ratio = long-term liabilities/(shareholders' funds + long-term liabilities) × 100/1, calculate the gearing ratio from the following information. Long-term liabilities are $18m; shareholders' funds are $14m.
A) 44%
B) 128%
C) 78%
D) 56%

Question

Quizplus · Accepted Answer

The gearing ratio is calculated as ($18m / ($14m + $18m)) × 100 = 56%.

Using the Formula Gearing Ratio = Long-Term Liabilities/(shareholders' Funds