Hi Victor/ Rusmin,
Recently, I came across an article (https://www.fool.sg/2013/08/23/what-is-gearing-ratio/) about gearing ratio. I got few questions:
- Why for normal company, gearing ratio formula can be both total borrowings/ total equity and total borrowings / total assets? while for REITs, gearing ratio formula is total borrowings/ total assets?
- How to calculate gearing ratio?
- Finance cost/ operating CF before changes in working capital?
- total borrowings/ total assets?
- finance cost/ total assets?
Lastly, what is the difference between gearing ratio and debt-to-equity ratio?
1.Normal companies should be using total borrowings/ total equity. total borrowings / total assets is only use for property company.
2.Our definition of gearing ratio is total borrowings/ total equity but if the company is a property company than you use total borrowings / total assets is only use for property company.
3. Gearing Ratio and debt to equity ratio is the same thing.
Is there a reason for using total borrowings/total assets instead of the normal debt-to-equity on property companies?
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