The reason why there are two different answers to this question is because two different methods to calculate the gearing ratio were taught. The longman ( skyes) textbook features the debt to equity ratio as Long-term debt/ owner's (LT/OE) however every other textbook such as Excel and Chapman feature the ratio as Total Liabilities/ Owner's Equity(TL/OE).
The first method give 0.75/1 or below industry average
while the second method gives 3.1 or above industry average
Therefore unfortunately business studies students have been taught a wrong method ( which one I cannot say, I don't know if our syllabus specifies how to calculate the gearing ratio) and this is why people answers differ. In my opinion, this question should be ruled invalid by BOS , as the fact that their are two different methods ( giving different answers) have been taught.
sirius
The first method give 0.75/1 or below industry average
while the second method gives 3.1 or above industry average
Therefore unfortunately business studies students have been taught a wrong method ( which one I cannot say, I don't know if our syllabus specifies how to calculate the gearing ratio) and this is why people answers differ. In my opinion, this question should be ruled invalid by BOS , as the fact that their are two different methods ( giving different answers) have been taught.
sirius
