Gearing - Revision history

Doug: Expand definition.

2024-05-11T19:24:28Z

Expand definition.

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	= '''100%'''.<br />		= '''100%'''.<br />

	The 100% figure is usually known as 'gearing'.		The 100% figure is usually known as 'gearing', and also sometimes 'levered'.

2022-04-17T14:05:02Z

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	===Other ~~links=~~==		==Other resource==
	[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, Will Spinney, The Treasurer]		[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, Will Spinney, The Treasurer]

	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2021-04-03T15:32:53Z

Add links.

2019-08-28T08:00:22Z

Add link.

2019-03-12T16:09:05Z

Expand definition.

← Older revision		Revision as of 16:09, 12 March 2019
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	'''1.''' <br />		'''1.''' <br />
	<i>Financial gearing</i> measures the relative amount of debt in a firm's capital structure.<br />		<i>Financial gearing</i> measures the relative amount of debt in a firm's capital structure.<br />
			The greater the gearing, the greater the total financial risk.

	Gearing is sometimes also known as <i>leverage</i>.		Gearing is sometimes also known as <i>leverage</i>.


			Appropriate levels of gearing depend mostly on the stability of operational cash flows.

			The more stable the cash flows, the greater the level of gearing that can safely be accepted by the firm.

			Firms with less stable cash flows should have lower levels of gearing, or none, or even negative gearing (net cash surpluses).

2019-02-14T11:39:53Z

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	<i>Gearing</i><br />		<i>Gearing</i><br />
	Assume the values of debt and equity are equal, say USD 1m each.<br />		Assume the values of debt and equity are equal, say USD 1m each.<br />
	D/E = 1/1 = 100%.<br />		D/E = 1/1

			= '''100%'''.<br />

	The 100% figure is usually known as 'gearing'.		The 100% figure is usually known as 'gearing'.
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	<i>Leverage</i><br />		<i>Leverage</i><br />
	Using the other calculation with the same inputs (D = 1 and E = 1):<br />		Using the other calculation with the same inputs (D = 1 and E = 1):<br />
	D / (D+E) = 1/2 = 50%.<br />		D / (D+E) = 1/2

			= '''50%'''.<br />

	The 50% figure is usually known as 'leverage'.		The 50% figure is usually known as 'leverage'.

2019-02-14T11:38:47Z

Expand examples.

← Older revision		Revision as of 11:38, 14 February 2019
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	Assume the values of debt and equity are equal, say USD 1m each.<br />		Assume the values of debt and equity are equal, say USD 1m each.<br />
	D/E = 1/1 = 100%.<br />		D/E = 1/1 = 100%.<br />
	~~This~~ is usually known as 'gearing'.
			The 100% figure is usually known as 'gearing'.


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	Using the other calculation with the same inputs (D = 1 and E = 1):<br />		Using the other calculation with the same inputs (D = 1 and E = 1):<br />
	D / (D+E) = 1/2 = 50%.<br />		D / (D+E) = 1/2 = 50%.<br />
	~~This~~ is usually known as 'leverage'.
			The 50% figure is usually known as 'leverage'.

2019-02-14T09:48:43Z

Generalise Gearing up section by removing number heading from it.

← Older revision		Revision as of 09:48, 14 February 2019
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	'''3.''' <br />		'''Gearing up''' <br />
	'Gearing up' refers to increasing the levels of financial or operation gearing - or both - within an organisation.<br />		'Gearing up' refers to increasing the levels of financial or operation gearing - or both - within an organisation.<br />
	The intention of gearing up is to improve expected net results. <br />		The intention of gearing up is to improve expected net results. <br />

2019-02-10T20:15:27Z

Expand 2nd definition.

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	'''2.''' <br />		'''2.''' <br />
	<i>Operational gearing</i> relates to the operating costs of a business, and measures the relative proportions of fixed and variable operating costs.		<i>Operational gearing</i> relates to the operating costs of a business, and measures the relative proportions of fixed and variable operating costs.

			The higher the proportion of fixed costs, the higher the operational gearing, and the higher the risk being undertaken by the business.

2019-02-09T20:01:22Z

Remove surplus link.