Definitions for

**"gearing"****Related Terms:**Leverage, Debt to equity ratio, Gearing ratio, Financial leverage, Debt/equity ratio, Debt / equity ratio, Debt-to-equity ratio, Leveraging, Debt-equity ratio, Equity ratio, Capital structure, Cost of capital, Total debt to total assets, Leverage ratios, Net debt, Margin lending, Equity, Leverage ratio, Weighted average cost of capital, Mezzanine , Mezzanine financing, Capital, Net asset value, Leveraged buy-out, Turnover ratio, Nav, Return, Asset mix, Mezzanine finance, Net asset value per share, Equity method, Rate of return, Capital ratio, Return on invested capital, Positive gearing, Investment, Equity investments, Turnover rate, Securitisation, Capital growth, Leveraged buyout, Portfolio turnover, Equity, Total return, Investments, Capital appreciation, Liquidity ratio, Yield, Debt capital

In finance, gearing is the general term used to describe the ratio between an...

Strategy increasing the return of portfolio by increasing the investment risk.

Used to describe the proportion of debt held by a company in relation to the funds belonging to the shareholders. It can be calculated by dividing the company's total net debt by common shareholders equity. A highly geared company is one that carries a lot of debt.

Measures the extent to which a company is funded by debt.... more on: Gearing

Ratio of financial payables to equity capital (the lower the ratio, the higher the share of equity in the interest-bearing capital employed)

Gearing relates to the measure of indebtedness, where the debt is balanced against the value of the equity held by a person or company in an asset.

The gearing ratio is calculated by dividing net debt by share capital.

Refers to the process of increasing funds available for investment through borrowing. the ratio of debt finance to equity finance or as: The use of long-term debt in financing an entity. Gearing may be measured as EBIT /EBIT - Interest . Used to be known as Leverage.

The relationship of debt to equity, and often measured as the ratio of total liabilities to equity (i.e. the debt equity ratio). Syn. Leverage

The ratio of ordinary share capital and reserves to borrowings.

Buy a house for £100,000 with a deposit of £10,000 and the rest as a mortgage. Six months later, sell it for £150,000 and you've made 400% profit on your original investment: that's gearing. Of course, it can work the other way too: see negative equity. Gearing can be expressed as the ratio of debt to assets, and is used by companies and investing individuals to enhance their profits, as well as by homeowners to allow them to buy a home.

Also known as Leverage. Gearing describes the situation when an asset is controlled for a relatively low upfront cost. The impact of this is that profits or losses on the position are magnified in percentage terms. It can be achieved by financial gearing, where an investor borrows money to buy an asset, thus reducing the initial cash outlay required. Alternatively, futures and options can be used to create gearing. In the case of futures, the investor only has to pay upfront margin when buying futures contracts rather than paying the whole purchase price. In the case of options, the investor only has to pay an upfront premium. In the case of companies, their level of financial gearing is measured by the Gearing Ratio or Interest Cover.

Derivative products are said to be 'geared' because only a proportion of their total market exposure needs to be paid to open and maintain a position. This percentage of the total is called a 'margin' in futures markets; and it's a 'premium' in options markets. Americans use the term 'leverage' for the same thing i.e. achieving a disproportionately high exposure with a small outlay.

The borrowings in the business, usually expressed as a ratio to equity or a percentage of shareholder funds.

a comparison between the amount of external borrowing a company has and it's shareholder funds.

The ratio of borrowings to ordinary shares. A highly geared company will have a high proportion of borrowings whose claims are prior to the ordinary shares

A car's gearing is the relationship between the spur gear and the pinion gear as compared to the transmission drive ratio of the vehicle. Use our gearing calculator. Report this Word Added by: mkranitz

Borrowing funds to leverage or boost your investment power.

is the Groupâ€™s net debt as a percentage of adjusted net assets.

The relationship between debt and equity. Gearing can be calculated in a number of ways. See chapter 18 for details.

The ratio of debt to equity capital. If a balance sheet shows 5 million of total assets and debt of 4 million, the gearing is 80%. A very highly geared business is living dangerously. As in a car, high gearing can produce dashing performance - but leads to problems when you have to climb a steep hill.

A British term used to describe one aspect of leverage of an option. It is not uniquely defined but the two most common definitions are (1) The price of the underlying divided by the price of the option (2) The strike price of the option divided by the price of the options.

company indebtedness, defined by the relationship between the funds provided by the company's ordinary shareholders, and funds carrying a fixed interest charge or against which a dividend must be paid.

or leverage or proprietary ratio - the ratio between a company's share capital and its debt (bonds, debentures, bank loans).

a) Borrowing money to increase returns and increase assets. A method used by investment trusts to generate superior returns. b) The ability to increase exposure by investing in futures contracts without making the underlying cash available. For Investment Trusts the company has one or more classes of borrowing, or shares that rank in priority to the ordinary shares as to capital and/or income. These are known as 'prior charges'. The gearing figure published indicates the extra amount by which shareholders funds would rise or fail if the total assets were to rise or fall. A figure of 100 means that the company has no gearing. A figure of 115 means the company would be 15% geared if fully invested. If the total assets were to rise or fall, shareholders funds would rise or fail by 15% or more.

Also called, leverage. How a company uses debt.

Net debt expressed as a percentage of shareholders' funds.

the relationship between a company's shareholders' funds and some form of outside borrowing. Expressed as a ratio.

Using lenders funds to fuel your investment growth. Remortgage to buy more, realising equity and keeping it moving.

this term means to borrow money for investment purposes. The amount of gearing is usually stated as a multiple/percentage of the initial amount being invested. Same as leverage

Net debt relative to equity.

The extent of borrowings as measured against equity.

A ratio between a company's borrowings and its share capital or 'shareholders funds' which is expressed as a percentage. High gearing means a proportionately high level of debt and vice versa.

The effect that borrowing has on the equity capital of a company. If the assets bought with the funds borrowed appreciate in value, the excess of value over funds borrowed will accrue to the equity shareholder, thus augmenting, or gearing up, capital value. Gearing works in the same way but in the opposite direction if the asset values fall.

Buy a house for £100,000 with a deposit of £10,000 and the rest as a mortgage. Six months later, sell it for £150,000 and you've made 400% profit on your original investment: that's gearing. Of course, it can work against you too, if the value of your home goes down.

Total borrowings, including bank overdraft, less short-term deposits, corporate bonds and cash, as a percentage of equity shareholders' funds.

The ratio between a company's debt and its equity. Companies which are highly geared have a high level of debt

A ratio of a borrower's own money to borrowed funds when making an investment.

A term used to describe the ratio of a company's borrowings in relation to its market value, and includes fixed capital and net bank borrowings.

Companies are financed by a combination of debt and shareholders equity. A gearing ratio will tell how much a company has borrowed in relation to the amount of shareholders funds in the business.

Ratio of your own money against borrowed funds

This is the ratio between the warrant price and the price of the underlying, this is used to determine how many warrants you need to hold in order to gain the same exposure as if you held the underlying share.

Borrowing money to invest in an asset. Gearing can also be used by fund managers to increase exposure in securities by investing in futures contracts.

Borrowing to invest. Positive gearing is when you borrow to invest in an income producing asset and the returns (income) from that asset exceed the cost of borrowing. Negative gearing is when you borrow to invest in an income producing asset and the cost of borrowing exceeds the returns (income) from that asset.

The ratio of the debt in a company's balance sheet to its equity. This is occasionally expressed as the ratio of the debt to the balance sheet total i.e. the sum of the debt and equity. In an active sense, it sometimes describes a situation in which the debt/equity ratio is increased.

borrowing to invest to purchase managed investments or shares.

This term refers to the fact that spread betting allows the client to buy (or sell) a financial product with substantially less money than the actual full market value of that financial product. So gearing is the correlation between potential profit or loss against initial deposit. A highly geared or leveraged bet involves substantial risk to your money (but also gives the possibility of high returns) At Larosspreads the initial deposit is normally at least the IMR.

Financial leverage.

spot price of the underlying security divided by the price of the option.

Gearing is an investment term for borrowing. Borrowing is permitted to buy further investments. If assets rise in value, gearing magnifies the return to ordinary shareholders. Correspondingly, if the share price falls, gearing magnifies the fall.

A company's debt to equity ratio. Companies that have a relatively high level of debt to equity would be said to be highly-geared and vice versa. Gearing is also known as the debt ratio or as leverage.

(refer to margin trading or leverage)

Gearing is the ratio of a company's borrowing to its assets. A highly geared company is one that has a lot of debt as a proportion of its total assets. Gearing also relates to the Notional Trading Requirement when compared to the total underlying value of a trade. See "Leverage".

Also known as leverage. To use borrowed funds (trading “on margin”) to purchases a financial instrument, which increases your exposure to the market with a lower capital requirement. Results in magnified profits and losses.

This is the ratio of debt to equity in a company's capital structure. Intermediate forms of finance such as redeemable preference shares and convertible loans can complicate the calculations and mean a variety of different ratios may be applied to the same company.

A term used in international banking to describe the borrowing of money to invest in an income-producing asset with capital growth capacity.

Usually associated with investment trusts where the fund will borrow (usually bank loans) against its assets to increase its investment exposure. One method of calculation is total borrowings less cash and short-term investments expressed as a percentage of total assets.

The main source of additional risk is gearing (the American term for this is leverage). This usually means the use of borrowed money. A company is described as highly geared if it has high borrowings in relation to shareholders' funds. High borrowings are often a contributory cause when companies go bust, but can greatly enhance shareholder returns when the business is going well. The other form of gearing is seen in derivatives markets where a small deposit can control a much larger amount of principal. See operational gearing.

It refers to the leverage or exposure of a product to movements in the underlying index. For example a 100% gearing means that the return exactly equals the return on the underlying asset.

The use of debt to increase exposure to high risk/reward. Gearing is also known as leverage. Financial spread betting is a leveraged product because you do not have to fund your total exposure when opening a position, only part of it, which is referred to as trading on margin

the gearing of a derivative is the price of the underlying divided by the price of the derivative. This can be used for crude assessments of leverage and option pricing. A more sophisticated measure is effective gearing (or lambda), which is the traditional gearing multiplied by the derivativeâ€(tm)s delta. see also leverage

Gearing is a feature of leveraged instruments such as covered warrants, options and futures. In an option, by investing a small amount called the option premium, investors can multiply their gains since returns are magnified.

Gearing refers to the strategy of borrowing for the purposes of investment. A 'geared investment' is one using borrowed funds. 'Leverage' is another word for gearing.

The comparison of a company's long term fixed interest loans compared to its assets. In general two different methods are used: 1. Balance sheet gearing is calculated by dividing long term loans with the equity (or proprietor's net worth). 2. Profit and Loss gearing: Fixed interest payments for the period divided by the profit for the period.

A company's debts relative to its equity capital. Usually expressed as a percentage. A company is said to be 'highly geared' if it has a high proportion of debt in its capital strucure.

Debt (loan capital) as a ratio of equity.

Borrowing money to invest, usually in residential property, shares or other income producing investments. (see also Property trusts)

Ratio of borrowing minus cash and short-term investments to total capital and reserves and minority interests.

If a trader buys £1000 of Barclays stock in the cash market and it rises by 10%, his profit will be £100. But if he buys the same position using a CFD he may only have to put up a deposit of £100. If the stock moves 10% higher his profit on capital invested will be £100 or 100%, this is gearing at work.

a) A measure of indebtedness, ie. the extent of borrowings as against the equity held by a person or company in an asset; b) The ability to increase exposure by investing in futures contracts without making the underlying cash available. (See also Leverage).

Gearing, or 'leverage', as it is called in the States, is the percentage of borrowing compared to the percentage of assets. In simpler terms, it means borrowing money, generally from a bank, in order to invest it. Investment trusts, both conventional and split capital, are able to do this because they are companies. The gearing ratio measures the percentage of capital employed that is financed by debt and long term finance. The higher the gearing, the higher the dependence on borrowings, and the higher the level of financial risk due to the increased volatility of profits.

Leverage. The use of borrowed funds in order to supplement an investor's own money when acquiring an asset or the proportion of funding obtained by debt.

Company borrowing as a proportion of shareholders' funds. A HIGHLY GEARED company is a riskier investment but when times are good earnings grow faster.

The amount borrowed as a proportion of the amount invested. The greater the borrowing, the greater the gearing (and the risk).

The most common use of the term 'gearing' is to describe the level of a company's debt compared with its equity capital, and usually it is expressed as a percentage. So a company with gearing of 60 per cent has levels of debt which are 60 per cent of its equity capital.

The ratio of investment

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.

The ratio of a company's share capital to its debt.

Corporate borrowing. A company with high gearing has a substantial exposure to debts.

The ratio of the share price to the warrant price (multiplied by the conversion ratio, if applicable). Gearing = ___________share price__________ warrant price x conversion ratio

The ratio of the loan amount against the value of a property.

In a derivative context, the possibility that a small sum of money can generate a disproportionately large return, inevitably matched by a larger risk. Also known as leverage.

The percentage that borrowings represent to shareholders funds (less intangibles) at the end of the latest and preceding financial period is shown for all companies except investment trusts, banks and insurance companies. For the purpose of gross gearing, debt is taken to be total borrowings, including finance leases and convertible debt, and without any deduction in respect of cash assets. Where the difference is substantial (i.e. the greater of 10 percentage points or 10% of the gross, whichever is the larger amount) gearing net of cash is also shown. Shareholders funds are defined as follows: Ordinary share capital + Preference share capital + Reserves = Shareholders funds The expression “neg. equity” indicates that there are actual borrowings but a negative equity base.

The ratio of non-profit assurances to with-profits assurances in the portfolio of a life assurance company / The ratio of fixed interest capital, including prior charges, to the ordinary share capital of a company.

The debts of a company expressed as a percentage of its equity capital. If a fund is geared it means that it has the ability to borrow money and therefore take advantage of greater investment opportunities. Therefore it has the ability to benefit when another fund might not have the available cash to do so. When a market is rising this means that investors will be in a position to gain more than those not in a geared fund. Conversely, when a market is falling investors are likely to be at greater risk. Also known as leverage.

Borrowing to invest. ‘negative gearing' is when interest payable exceeds assessable income from the geared investment, resulting a deduction against other assessable income.

Used to describe the relationship between debt and Equity and is calculated by dividing the company debt by common shareholders Equity. A highly geared company is one that carries a high proportion of debt. See Debt/Equity Ratio.

The term used by investment trusts when they borrow money to increase their exposure to a stockmarket, hopefully when it is rising. This can magnify performance, negatively as well as positively.

Gearing ratio is the amount of a Company's ordinary capital in relation to fixed interest or prior charge issued such as debenture loan stocks, preference shares or the like. The ratio is arrived at by dividing the amount of the ordinary capital into the fixed interest capital.

The ratio of income required to service debts.

Describes the practice of borrowing to invest. Gearing is usually expressed as a ratio of the borrowed amount divided by the total amount invested.

The ratio of a company's debt to its equity (shareholders funds). Net borrowing ——————— Total net assets

The ratio of debt (borrowing) to equity (broadly speaking, ordinary share capital). The more a company has borrowed compared with its equity, the more highly geared it is said to be.

A company's debts expressed as a percentage of its equity capital. High gearing means that debts are high in relation to assets.

Ratio of net debt to equity.

Net debt divided by total equity.

A process whereby potential capital gain and income due to investors are boosted by fixed interest borrowing. The return on this extra investment, minus the cost of the borrowing, gives investors an enhanced or geared profit.

Measure of the degree to which a business is funded bydebt rather than shareholders' equity. The US expression for the samething is leverage. A highly geared company carries a lot of debt.

A key ratio for assessing a company's stability and creditworthiness. Gearing is the amount of the company's finance which has been borrowed as a percentage of net worth. Lending to a highly geared company involves a higher degree of risk.

A measure of the ratio of underlying shares to which exposure is gained by purchasing one (1) call warrant. Gearing = Underlying share price Call warrant price A gearing of 10 times implies that every RM1.00 exposure in the call warrant could equate to an exposure of RM10.00 in the underlying share.

(1) a measure of the debt ratio which is the amount of borrowing compared with the equity in an asset. (2) borrowing to invest, such as when purchasing a house using a mortgage or purchasing a share portfolio using a margin loan. Can be positive or negative.

The amount of borrowing versus debt on a company's Balance Sheet (Net debt/Ordinary shareholders' funds). Warrants and options also exhibit gearing; ie a small move in the price of the underlying asset can be magnified in the move in the price of the option.

This is the ratio of long-term funds with fixed interest that makes up a firm's capital. It describes the level of a company's debt compared to equity capital in percentage form.

The ratio between the drive gear and the driven gear. See alpine gearing and half-step gearing.

See debt-total assets ratio.

The extent of a person or company’s borrowings as against the equity they hold.

The parts by which motion imparted to one portion of an engine or machine is transmitted to another, considered collectively; as, the valve gearing of a locomotive engine; belt gearing; esp., a train of wheels for transmitting and varying motion in machinery.

A train of gear wheels. A general term for the parts of a machine or mechanism, taken collectively, which transmit motion.

wheelwork consisting of a connected set of rotating gears by which force is transmitted or motion or torque is changed; "the fool got his tie caught in the geartrain"

mechanical, hydraulic, electric, or other means for transmitting mechanical motion or force.

**Keywords:**harness

Harness.

Using a mechanical system of gears or belts and pulleys to increase or decrease shaft speed. Power losses from friction are inherent in any gearing system.

The use of borrowing potentially to increase the amount you get back, but which will also increase the risk.

a measure of the impact on council taxes of increasing budgets. This varies widely between local authorities. An authority that meets 25% of its budget through council tax is said to have a gearing of 4.0. Therefore, a 1% increase in budget would lead to a 4% increase in council tax. ( See section 2.2.4)

Shifting to lower or higher gears to maintain a certain cadence.

Is a measure of exposure. It relates the number of warrants that can be purchased for the same price of the stock. For example, if the stock is trading at 150 and the warrants are trading at 30, then the gearing is 5.00 or 5-to-1.

Reducing exposure to risk of loss resulting from fluctuations in exchange rates, commodity prices, interest rates etc.