Gearing (1 Viewer)

[hyperbole]

Hello.

The equation for calculating a business's gearing is debt : equity right?
Because for one of the worksheets we were given in class, the business's liabilties total $59000 while the owner's equity is $17000. But this means that gearing is around 340% which seems a little ridiculous.
Could someone let me know whether or not I'm calculating it correctly.

Thanks!

 

[cro_angel]

59000:17000
then you divide each side by 17000
= 3.5:1
for every $1 contributed by the owners.. they have borrowed a further $3.50
this highly geared.. not good.. should be aiming for 1:1
we dont usually do this ratio as a %.. but im assuming that you would put the gearing as being 59000 on the total (76000) because its seeing how much of your money is borrowed out of the whole thing.. and from figuring it out that way it would be 78% gearing?
dont quote me on that though.. stick with the $1 oe they borrow a further $3.5

 

[hyperbole]

59000:17000
then you divide each side by 17000
= 3.5:1
for every $1 contributed by the owners.. they have borrowed a further $3.50
this highly geared.. not good.. should be aiming for 1:1
we dont usually do this ratio as a %.. but im assuming that you would put the gearing as being 59000 on the total (76000) because its seeing how much of your money is borrowed out of the whole thing.. and from figuring it out that way it would be 78% gearing?
dont quote me on that though.. stick with the $1 oe they borrow a further $3.5

thank you!

 

[cro_angel]

anytime.. hope i wasnt too confusing
financial planning and management is like the only topic im confident about lol