The correct answer is B. 40%.
Gearing ratio is a measure of a company’s financial leverage. It is calculated by dividing the company’s debt by its equity. A higher gearing ratio indicates that the company is more leveraged, meaning that it has more debt relative to its equity. This can be a risky situation, as the company may have difficulty repaying its debt if its profits decline.
In this case, the company has debt of Rs. 220, cash balance of Rs. 20, and equity of Rs. 300. Its gearing ratio is therefore 220 / (300 – 20) = 40%.
Option A is incorrect because it is the percentage of debt to total assets, not to equity. Option C is incorrect because it is the percentage of equity to total assets, not to debt. Option D is incorrect because it is the percentage of cash to total assets, not to debt.