Gearing Ratio Calculator

Calculate your company's gearing ratio instantly. Use the fields below to input your data, and the results will update automatically.

What is the Gearing Ratio?

The gearing ratio measures the level of a company’s financial leverage. It shows the proportion of debt to equity, which indicates the company’s reliance on debt for financing its operations. A high gearing ratio implies more debt compared to equity, while a lower ratio indicates lower reliance on debt.

How to Calculate the Gearing Ratio?

The gearing ratio formula is simple:

Gearing Ratio (%) = (Total Liabilities / Total Equity) x 100

By dividing total liabilities by total equity and multiplying the result by 100, you can easily determine the company’s gearing ratio. This ratio helps investors and creditors assess the company’s financial health and risk level.

Why is the Gearing Ratio Important?

The gearing ratio is crucial for both investors and companies. It helps assess the financial risk of a company. A high gearing ratio may indicate that a company is highly leveraged, which could lead to financial distress in times of economic downturns. On the other hand, low gearing means the company relies more on equity financing, which may be considered safer but could limit growth opportunities.