Gearing and Pre-€STR: Difference between pages

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imported>Doug Williamson
(Layout.)
 
imported>Doug Williamson
(Reword and update due to replacement by €STR. Source: https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/euro_short-term_rate/html/eurostr_overview.en.html)
 
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1.  
''Interest rates - reference rates.''


''Financial gearing'' measures the relative amount of debt in a firm's capital structure.
€STR is an acronym for Euro Short TErm Rate, whose formal publication began on 2 October 2019.


Gearing ratios can be calculated in several different ways, so consistency of approach is important.


Two essential bases to define are:
Before €STR's formal publication, the European Central Bank (ECB) published preliminary figures, referred to as 'pre-€STR' for the period up to 1 October 2019.


i. The use of book or market values.
Pre-€STR aim was to reduce market uncertainty, allow market participants to assess the new rate and its statistical properties, and provide an opportunity to adjust processes and procedures to ensure transition to €STR.


ii. The use of Debt divided by Equity ( D / E ) or of Debt divided by Debt plus Equity = D / ( D + E ).


Pre-€STR was also sometimes written as 'Pre-ESTER', and €STR is similarly sometimes written as 'ESTER'.


Historically, use of the D/E version of the measure was more common in the UK.


With respect to the Debt figure, practice varies in including or excluding certain items such as cash, short term borrowings, leases, pensions and other provisions.
==See also==
* [[Benchmark]]
* [[Benchmarks Regulation]]
* [[EONIA]]
* [[€STR]]
* [[European Central Bank]]
* [[O/N]]
* [[Reference rate]]
* [[RFR]]
* [[Risk-free rates]]
* [[SONIA]]


Practitioners may also adjust the Equity figure, for example to exclude intangible assets.


==Other links==
* [https://www.ecb.europa.eu/paym/initiatives/interest_rate_benchmarks/shared/pdf/ecb.Pre-ESTER.en.pdf ECB Pre-ESTER]


2.
[[Category:Accounting,_tax_and_regulation]]
 
[[Category:The_business_context]]
''Operational gearing'' relates to the operating costs of a business, and measures the relative proportions of fixed and variable operating costs.
[[Category:Financial_products_and_markets]]
 
 
3.
 
'Gearing up' refers to increasing the levels of financial or operation gearing - or both - within an organisation.
 
The intention of gearing up is to improve expected net results. 
 
The consequence of gearing up is normally to increase risk.
 
Many financial disasters have been a consequence of gearing up (or leveraging) excessively in this way in earlier periods.
 
 
== See also ==
* [[Debt equity ratio]]
* [[Debt to equity ratio]]
* [[Intangible assets]]
* [[Leverage]]
* [[Leveraged]]
* [[Leveraged takeover]]
* [[Levered]]
* [[MCT]]
* [[Off-balance sheet finance]]
* [[Ungeared]]
* [[Ungeared cash flow]]
 
 
===Other links===
[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, The Treasurer, July 2012]
 
[[Category:Corporate_finance]]

Revision as of 14:08, 29 January 2020

Interest rates - reference rates.

€STR is an acronym for Euro Short TErm Rate, whose formal publication began on 2 October 2019.


Before €STR's formal publication, the European Central Bank (ECB) published preliminary figures, referred to as 'pre-€STR' for the period up to 1 October 2019.

Pre-€STR aim was to reduce market uncertainty, allow market participants to assess the new rate and its statistical properties, and provide an opportunity to adjust processes and procedures to ensure transition to €STR.


Pre-€STR was also sometimes written as 'Pre-ESTER', and €STR is similarly sometimes written as 'ESTER'.


See also


Other links