Crispin has decided to calculate its gearing ratio according to the formula: prior charge capital / equity capital (including reserves).
At which of the following levels would it be neutrally geared?
The correct answer is: 100%.
The gearing is neutral when there are equal amounts of debt and equity in the capital structure. This is the situation described by a ratio of 100% on this basis of calculation, and therefore this is the correct answer.
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