Answer to Question #263304 in Finance for olga

Question

As an expert, advise on finance decision issues on equity and loan funds.

Explain the concept of “gearing” and its impact on a business. 

Answer 1

The gearing ratio is a metric that measures a company's financial risk. A company's financial health can be jeopardized if it has too much debt. A high gearing ratio indicates a high debt-to-equity ratio, whilst a low gearing ratio indicates the reverse.