Financial Gearing

Definition of 'Financial Gearing'

A term used to describe the relationship between the Companys debt and equity shareholders funds.

Gearing is usually expressed as a percentage and is calculated by dividing the Companys debt by its equity.

A highly geared company is one where there is a high proportion of debt to equity, and can be considered a risky investment as there is a higher likelihood of the company being unable to pay its large debts.

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