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Friday, April 8, 2011

Capital Gearing Ratio Formula & Example

Definition: Capital Gearing Ratio is used to analyze the capital structure of a firm. It indicates the relationship between various types of securities and capitalization such as debentures, preference share, reserves, etc. High geared means lower proportion of equity, while low geared means higher proportion of equity.

Formula:
Capital Gearing Ratio = Equity / Fixed Interest Bearing Funds
(Note

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