Gearing

Gearing refers to the use of debt as part of the financial structure of a business. The use of debt as a source of finance reduces the amount of equity funding that is required. However, a business partly financed by debt needs to be satisfied that it will be able to meet the interest payment obligations of the debt providers.

 

reference: Business Studies / Accounting. Accounts & Finance Glossary. Jim Riley BA(Hons) MBA FCA // tutor2u

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