Albert RobertsonBearishMeasure Gearing Ratio to See How Much of a Company Is Built on Debt
Every company uses some combination of its own money and borrowed money to operate. The ratio between the two reveals how much of the business is financed by debt versus shareholders equity. That ratio is called the gearing ratio, and it is one of the most widely used measures of financial health in fundamental analysis.
For traders, the concept matters beyond corporate balance sheets. The relationship between debt and equity in a company is structurally parallel to the relationship between margin and capital in a leveraged trading account. Understanding one illuminates the other.
