Illustrate the meaning of gearing, Financial Management

Assignment Help:

Illustrate the meaning of Gearing

Gearing is the relationship between equity anddebt. Debt is typically long term liabilities that the organisation has. Equity is all the share capital and reserves. There are 2 ways that the gearing ratio can be computed are:

  • Equity gearing = debt capital vs. equity capital
  • Total gearing = debt capital vs. total capital

Equity gearing ratio = (Debt capital/Equity) x 100%

                                    (Capital and reserves)

(100% = same amount of debt and equity)

Total gearing ratio    = (Debt capital/Total capital) x 100%

                                    (Shareholder funds + debt capital)

(50% = same amount of debt and equity)

 


Related Discussions:- Illustrate the meaning of gearing

How industrial company inflate the value of its inventory, How can an indus...

How can an industrial company inflate the value of its inventory so as to decrease net income and the taxes is has to pay that year? If a company increases the value of its inv

What is performance appraisal - cost of capital, What is Performance apprai...

What is Performance appraisal - cost of capital Performance appraisal further, cost of capital framework can be used to evaluate financial performance of top management. I

Dividend yield plus growth in dividend method, Dividend yield plus growth i...

Dividend yield plus growth in dividend method When the dividends of the firm are predictable to grow at a constant rate and the dividend payout ratio is constant, this techniq

Discounted pay back period (dpbp), Discounted Pay Back Period (DPBP) : ...

Discounted Pay Back Period (DPBP) : The discounted payback period is the number of periods taken in recovering the investment outlay on the present value basis.  Discounted pa

Compare and contrast mutual and stockholder, Compare and contrast mutual an...

Compare and contrast mutual and stockholder-owned savings and loan associations. A few savings and loan associations are owned by stockholders, just like commercial banks and ot

Rationale for corporate governance, Rationale for corporate governance ...

Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti

Brainstorming, Brainstor ming An idea production strategy that exc...

Brainstor ming An idea production strategy that exclusively encourages any and all alternatives while withholding any appreciation of those options.

Role of investment banking in investment intermediaries, What is the role o...

What is the role of investment banking in investment intermediaries? Investment banks: These banks assist corporations or governments into the issue of new debt or equity

Determine the working capital in the firm, a) Year 2 Current Ratio = 700 / ...

a) Year 2 Current Ratio = 700 / 300 = 2.33 : 1 Year 1 Current Ratio = 500 / 200 = 2.5 : 1 Year 2 Acid Test = (700 - 350) / 300 = 1.17 : 1 Year 1 Acid Test = (500 - 250) / 200 =

Yield spread measures relative to a spot rate curve, Nominal spread o...

Nominal spread of a non-treasury bond can be defined as the difference between the bond's yield and the yield to maturity of a benchmark treasury coupon security.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd