Capital Gearing Ratio in Simple language

29 November 2009

Hi,

Pl inform how to compute Capital Gearing Ratio in a layman's language. I read many books but still unable to understand it properly.

regards,

Neelima

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(Guest)

In layman's language,

Capital gearing ratio=Capital bearing risk

Capital not bearing risk

Capital bearing ratio includes debentures(risk is to pay interest) and preference capital (risk to pay dividend at fixed rate).

Capital not bearing risk includes equity share capital.

Therefore you can also say,

Capital gearing ratio= Debentures+Preference share capital

Equity shareholders' funds

Regards

Poonam Thanvi

aiming to crack it this time (student) (38 Points)
Replied 29 November 2009

capital gearing ratio in financial terms is

borrowed funds +pref /shareholders funds-prefrence

in simple laymans language it is capital en titled to fixed int & dividend by capital not entitled to fixed interest & dividend

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 01 December 2009

Dear Neelima,

Hope the above two have made it clear..Tats the simplest it can get it seems..

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