Work out total shareholders’ equity as a measure of the net assets in the business (total assets less total liabilities)..
Then work out the net debt-to-equity (gearing ratio) but then investors need to take a few more items off the balance sheet.
These include subtracting cash (an asset) from interest bearing debts (a liability). The difference equals a net debt which when divided against total shareholders’ equity, you are then provided with the gearing ratio.
Eg.
Total shareholders’ equity in MCG: 816 million.
Subtracting the $516 million in cash (an asset) from interest bearing debt of $8,439.8 billion (a liability).
The difference equals net debt of $7,923.5 billion - which when divided against $861 million in total shareholders’ equity gives a gearing ratio of 920.3%.
