Gearing Ratio

Knowledge Center

   

Description of Gearing Ratio. Explanation.

Contents

  1. Summary
  2. Forum
  3. Best Practices
  4. Expert Tips
  5. Resources
  6. Print
 

Definition Gearing Ratio. Description.


The Gearing Ratio measures the percentage of capital employed that is financed by debt and long term finance. The higher the gearing, the higher the dependence on borrowings and long term financing. The lower the gearing ratio, the higher the dependence on equity financing. Traditionally, the higher the level of gearing, the higher the level of financial risk due to the increased volatility of profits. Utilizing gearing amplifies the potential gain from an investment or project, but also increases the potential loss.


The Gearing Ratio is calculated as follows: divide Long Term Liabilities by (Equity + Long Term Liabilities) X 100 which results in a percentage.


Note that in the USA the term "Leverage" or "Financial Leverage" is more commonly used.


In certain Financial Debt Covenants, the borrower may be obliged to maintain a certain gearing ratio.


Gearing Ratio Forum
  When is Gearing Ratio High or Low?
Hi, I was just wondering. The article says "the hi...
     
 
  Reserves in Gearing Ratio
Does Equity includes Reserves and Surplus? Any spe...
     
 

Gearing Ratio Special Interest Group


Special Interest Group

 

Best Practices - Gearing Ratio Premium

Expert Tips - Gearing Ratio Premium

Resources - Gearing Ratio Premium

Financial Statement Analysis | Ratio Analysis

This presentation provides insights in Financial s...
Usage (application): Ratio Analysis, Finanical Statement Analysis
 
 

News about Gearing Ratio


     
 

Videos about Gearing Ratio


     
 

Presentations about Gearing Ratio


     
 

More about Gearing Ratio


     

Compare also: Debt to Equity Ratio  |  Recapitalization  |  Undercapitalization

Special Interest Group Leader

You here


 

Return to Management Hub: Finance & Investing


More on Management  |  Return to Management Dictionary  | 

 

This ends our Gearing Ratio summary and forum.

About 12manage | Advertising | Link to us | Privacy | Terms of Service
Copyright 2017 12manage - The Executive Fast Track. V14.1 - Last updated: 23-10-2017. All names tm by their owners.