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Gearing
(borrowing ratio)
|
bank
o.d. + s.t. bond payments + other s.t. loans + total l.t. loans x 100 |
|
Shareholders' Funds |
Benchmark: 30%
Total long term debt plus
short term borrowing as a percentage of shareholders’ funds.
Shows how indebted a company
is in relation to its worth, hence its vulnerability to changes in interest
rates or a drop in performance (see current ratio and quick ratio for ability to
meet short term debt). The higher
the ratio the greater the company’s borrowing level.
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