Equity Gearing

Equity Gearing

Shareholder’s Funds

CL + Total LT Loans + Provisions & Minority Interests + SH Funds

 

Benchmark: 0.6

Shareholders’ funds divided by total investment (shareholders funds, total short term debt plus provisions).

Shows how many times company worth covers its total debt.

Unlike the gearing ratio, this accounts for money received on trade credit.

The lower the ratio, the more highly geared the company, hence vulnerability to changes in interest rates (see gearing, current ratio and quick ratio).