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What is the difference between a highly geared company and a lowly geared company?
Wiki User
∙ 10y ago
Gearing is a measure of how big a company's borrowings are, relative to its size. There are different methods of calculating gearing but the simplest and most effective is the debt-to-equity ratio. This shows how much the company owes (debt) compared to its size (equity) and is calculated by dividing total borrowings (current and long term) by net assets and is expressed as a percentage.
A company with a high percentage is said to be highly geared and has large borrowings (normally from the bank) relative to its size and vice versa for a company with a low percentage.
Wiki User
∙ 10y ago
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