Capital Gearing

Tax Glossary Definition

Capital Gearing

Capital Gearing – Capital gearing refers to the relationship between a company’s fixed-interest or fixed-dividend bearing capital (such as debt and preference shares) and its equity capital. It reflects how much a firm relies on borrowed funds compared to shareholders’ investment, thereby indicating its level of financial leverage and exposure to risk.

Example: A company with substantial debt and relatively low equity is said to have high capital gearing, which may magnify both potential profits and financial risk.

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