Gearing Ratio
Measure of financial leverage; proportion of borrowing vs equity.
Formula
Gearing Ratio = (Non-current Liabilities / Capital Employed) × 100%
Real World
In 2023, Thames Water had a gearing ratio above 80%, meaning most of its capital came from debt — this alarmed investors and regulators about its ability to fund repairs without further borrowing.
Exam Focus
State the ratio, then evaluate whether high gearing is good or bad depending on the business context given.
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