Day: June 6, 2018

Wood Dragon Ltd has provided a list of its assets and liabilities as at 31 December 2017 as follows:

• Long-Term Assets £1.8M
• Inventory £1.7M
• Accounts Receivables £1.5M
• Bank Account £1.4M
• Cash £0.1M
• Accounts Payable £1.9M
• Long-term Bank Loan £4M
• Reserves  £0.5M
• Share Capital £1.0M
• Revenue  £20.8M
• Cost-of-Sales  £17.0M
• Net Profit Margin  £1.5M
• Purchases  £10.1M

What is Wood Dragon’s Capital Gearing percentage ratio?

Select ONE answer:

1. 10.00
2. 26.32
3. 68.66
4. 36.5
5. 72.72

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 5 – £4M / (£4M + £0.5M + £1.0M) * 100 = 72.72%

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