Financial gearing ratios are a group of popular financial ratios that compare a company’s debt to other financial metrics such as business equity or company assets. Gearing ratios represent a measure of financial leverage that determines to what degree a company’s actions are funded by shareholder equity in comparison with creditors’ funds.
Gearing ratios can be a useful part of fundamental analysis. Gearing ratio calculations help provide clarity into the sourcing of a firm’s operation funding, which provides a greater insight into a company’s reliability and whether they are able to withstand periods of financial instability. Learn more about analysing company fundamentals.