Question 1

**Section A**

Extracts from a company's statement of financial position show:
Ordinary share capital: $200,000
Retained earnings: $350,000
10% Bank loan (repayable in 5 years): $150,000
Trade payables: $80,000

What is the company's gearing ratio? (Calculate as Debt / (Debt + Equity) and enter as a percentage to one decimal place, e.g., 25.5)

Accepted Answer

Identify Debt (long-term liabilities) and Equity (share capital + reserves). Plug into the formula: Debt / (Debt + Equity) * 100.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Including trade payables in the debt figure, or calculating Debt/Equity instead of Debt/(Debt+Equity).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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