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Question
The ratio between equity (owned funds) and debt (borrowed funds) is called ______ gearing.
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Solution
The ratio between equity (owned funds) and debt (borrowed funds) is called capital gearing.
Explanation:
The ratio between equity (owned funds) and debt (borrowed funds) is called Capital Gearing.
- If a company has more debt than equity, it is said to have high gearing.
- If a company has more equity than debt, it is said to have low gearing.
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