Leverage Ratio

(redirected from Gearing Ratios)

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.
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References in periodicals archive ?
As at end-June 2015, Noble's gearing and net gearing ratios (with readily marketable inventory (RMI) adjustments) increased to a respective 0.92 times and 0.70 times (end-December 2014: 0.61 times and 0.50 times).
The emergence of funding and liquidity strains as well as continued pressure on the Group's financial profile (such that its MYR I-adjusted gearing and net gearing ratios stay elevated at above 0.8 times and 0.7 times, respectively, and/or its FFODC drops to below 0.25 times) could also result in downward rating pressure.
The rating is however, constrained by short track record, high gearing ratios, volatility in raw materials & finished goods prices and major dependence on fortunes of the steel industry.
Long term debt equity and overall gearing ratios were high as on Mar.
Gearing ratios have become more conservative across the Americas, particularly at the corporate borrowing level.
The Group's debt increased to MYR 2.40 billion as at end-June 2013, translating into a gearing ratio of 0.32 times (end-June 2012: MYR 1.62 billion and 0.22 times), although its typically hefty cash pile kept its net gearing ratio at a conservative level of less than 0.10 times.