Gearing Ratio
Measure of financial leverage; proportion of borrowing vs equity.
Formula
Gearing Ratio = (Non-current Liabilities ÷ Capital Employed) × 100
Real World
During its 2019 collapse, Thomas Cook had a gearing ratio exceeding 150%, meaning debt vastly outweighed equity — making it extremely vulnerable when revenues fell.
Exam Focus
State the threshold (typically >50% = high gearing) and link it explicitly to financial risk or investor confidence for full marks.
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