What is Capital Gearing Ratio? What does it indicate?
Capital Gearing Ratio is one of the ratios of miscellaneous group, which measures the fixed income bearing securities which consists of preference share capital, debentures and long term loans to equity capital. A company is said to be highly geared if the fixed income bearing securities are more than the equity capital in the capital structure. On the other hand, company is said to be less geared if the equity capital is high than the fixed income securities.
Formula to calculate Capital Gearing Ratio = Fixed Income Bearing Securities / Equity Capital