Volume 5 video

Q&ACategory: QuestionsVolume 5 video
Tan Kok yee asked 3 years ago

Hi PC, In your volume 5 video that is the gear ratio for RHT and CRT. I unable to calculate the ratio. Can u write down the formula to calculate the ratio.    Thanks  

2 Answers
paul wong answered 3 years ago

Hi Kok Yee,
I believe you are referring to the REITs.
The gearing ratio for REITs are different form that of other stocks.
They have to meet certain guideline stipulated the respective Securities Commissions.
The Gearing Ratio is calculated as the Total Borrowings (Current Borrowings + Non-Current Borrowings) and is divided by the Total Assets; ie:
(Current Borrowings + Non-Current Borrowings)/Total Assets
hope this helps.

Tan Kok yee replied 3 years ago

Hi PC,

you mean total liability / total asset right?
However from the video 5 the CRT
total liability is 56814.8
Total asset is 100401
from the formula 56814.8/100410 is 0.56
why the answer you provide in the KPI is 0.47? How u get this answer?

paul wong answered 3 years ago

Hi Kok Yee,
By CRT you mean Croesus Retail Trust which is a REIT?
The measurement of the gearing ratio between REITs and other stocks are different.
In REITs it is the Total Borrowings/Total Asset not Total Liabilities/Total Assets
What is the difference?
Total Borrowings are funds which the REIT borrows from financial institutions whether it is Current or Non Current.
Total Borrowings is not Total Liabilities
The borrowings exist as AN ITEM under the Current Liabilities and Non Current Liabilities heading. Sometimes there may not be any borrowings under the Current Liabilities heading.
In other stocks (non REITs), the gearing ratio is calculated as Total Liabilities Total Equity.
Hope this clarifies.

paul wong replied 3 years ago

Total Liabilities/Total Equity