Gearing ratios, also known as leverage ratios, measure the relationship between a company's capital structure, particularly its debt and equity. These ratios are crucial for assessing a company's financial stability and risk level.
Income gearing refers to the relationship between a company’s operating income and its financial obligations, particularly interest expenses on incurred debt. Essentially, it measures the extent to which a company's activities are funded by borrowed money.
Ratio analysis is the use of accounting ratios to evaluate a company's operating performance and financial stability. Examples include return on capital employed and gross profit percentage for profitability assessment. Additionally, the liquid ratio examines solvency, while gearing ratios evaluate the company's financial structure.
