question...gearing (1 Viewer)

[dezzy]

i have a quick question people:-

is there a "gearing" ratio in the financial topic?
if yes/ is it connected to equity somehow?

cheeeers!

 

[= Jennifer =]

yes it is in the financial topic

it is connected to equity as it is the amount of debt: equity

 

[truly-in-bliss]

The gearing ratio indicates the relationship between the long term funds provided by creditors and those provided by the bizs owners, also known as the debt to equity ratio.

The higher the ratio, the less solvent of a biz, i.e.: the higher the risk.

 

[Malazn Pleasure]

Originally posted by dezzy
i have a quick question people:-

is there a "gearing" ratio in the financial topic?
if yes/ is it connected to equity somehow?

cheeeers!

yes

yes

 

[Aj10001]

gearing ratio = debt to equity ratio, generally the lower the better.

 

[marko]

re: gearing
in the exam, the business will *likely* either be in a situation that is

** 'too risky', ie is being funded by an excessive amount of debt finance.... 3:1 or greater

**'too safe', ie opposite to above - taking on more debt finance will allow greater rate of expansion with an acceptable level of risk ..... 1:1 or less

(the ratio's are approximations, its been a while since ive done this )