Leverage Ratio

(redirected from Financial Gearing)

Leverage Ratio

In risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock. Another example is a simple debt-to-equity ratio, which is calculated by dividing total debt by total equity. Generally, companies with higher leverage as determined by a leverage ratio are thought to be more risky because they have more liabilities and less equity. A leverage ratio is also called a gearing ratio or an equity multiplier.
References in periodicals archive ?
The rating affirmations and Stable Outlooks reflect the efficiency challenge embedded in the final determination of tariffs for the period April 2015 to March 2020 (AMP6) and the group's relatively low financial gearing.
What the UK's central bank now presented is a proposal for a fund-based deposit model for a liquidity facility, which would enable Islamic lenders to offer both a wider retail product portfolio and achieve the necessary financial gearing under tighter banking regulations.
Despite our aggressive expansion strategy, our balance sheet remains healthy and financial gearing still very comfortable, with much room to take on new opportunities that may come our way,' Sian said.
Sheikh Mohamed Bin Faisal Al Thani, Vice-Chairman of Aamal, commented,"This performance clearly reflects the benefits of the group's approach to diversification, building a balanced and resilient portfolio of businesses across key sectors of the broadening Qatari economy, to drive profitable organic growth and margin expansion while maintaining strict control of costs and prudent levels of financial gearing.
With a strong balance sheet and low financial gearing, we are well positioned to take advantage of new potential PRS investment opportunities following the EU referendum.
By progressively adjusting its debt structure, the Group has been effectively controlling its financial gearing and debt level.
He then shows people who are not economists or bookkeepers how to analyze and interpret a report's account of profitability, liquidity, financial gearing, shareholder interests, predicting corporate failure, using other information in company annual reports business valuations, and what financial statements do not reveal.
This has driven some outstanding financial performance, allowing us to retire a significant proportion of the company's debt and reduce financial gearing.
Nevertheless, there is a considerable risk in the valuation because the financial gearing is high after the capitalisation in June.
It stressed the "well-publicised change in the availability of financing for commercial transactions" and pointed out that "the market's attitude towards financial gearing has changed significantly, especially against the backdrop of the uncertainty in the economy".
Although students who have studied financial accounting will know about financial gearing, which considers sources of long-term finance, they might not be so familiar with the concept of operational gearing.
Financial gearing and corporate control are important value drivers because the relationship between debt and equity influences both management's and investors' attitudes towards risk and expectations for returns.