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 $18m, Shareholders' funds $14m.
A)128%.
B)56%.
C)78%.
D)44%.

Question

Quizplus · Accepted Answer

The gearing ratio is calculated as ($18m / ($14m + $18m)) × 100 = ($18m / $32m) × 100 = 56.25%, which rounds to 56%.

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