Ratios that express a company’s capital gearing. There are a number of different ratios that can be calculated from either the balance sheet or the profit and loss account. Ratios based on the balance sheet usually express debt as a percentage of equity, or as a percentage of debt plus equity. Income gearing is normally calculated by dividing the profit before interest and tax by the gross interest payable to give the interest cover.
Subjects: Financial Institutions and Services — Accounting.