Gearing Ratio [Virtual Learning Arcade]
An explanation of how the gearing ratio is calculated as part of the ratio analysis simulation in the Virtual Learning Arcade.
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Gearing Ratios
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Gearing Ratio
The gearing ratio allows you to examine the capital structure of the company. It summarises the proportion of debt (loans etc.,) and equity (from shareholders). A ratio that is greater than 100 percent this implies that the company has a high degree of leverage (high gearing). This can be interpreted as the company is taking risks through having a high level of debt compared to its equity. - Gearing ratio = (loan capital + preference share capital) / (total capital (loan + preference + equity))
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Submitted by bized on Wed, 14/03/2001 - 13:00
