Gearing (Capital Gearing; Equity Gearing; Financial Gearing; Leverage)
The ratio of the long-term funds with fixed interest charges, such as *debentures and *preference shares, making up a company’s capital to its *ordinary share capital. A company is said to be highly geared when its fixed interest capital is dominant and low geared when its capital is predominantly in ordinary shares, especially in relation to other similar companies. A high-geared company is considered to be a speculative investment for the ordinary shareholder and will be expected to show good returns when the company is doing well. The US word leverage is increasingly used in the UK.
