Fundamental Glossary / Debt & Financial Stability
Gearing Ratio
Another name for the weight of debt in the capital structure. Definitions vary, so the formula has to be stated.
Formula
Common versions: debt / (debt + equity), or net debt / equity, or net debt / (net debt + equity).
What it means
Gearing is the British and Commonwealth word for leverage. In Indian and UK reports, "gearing" usually means a debt-to-equity style ratio.
Because formulas differ, two companies can both claim gearing of 30% and not be comparable. Read the definition in the credit note or the annual report.
How to read it
Falling gearing from retained profit is the slow, healthy path. Falling gearing from a rights issue repairs the ratio and dilutes owners. Say which one happened.
What to watch
Equity for this ratio should not be flattered by a brand-new revaluation. Net debt should include leases if peer gearing includes them.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.