Capital Gearing Ratio


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Capital Gearing Ratio: Capital gearing (or leverage) refers to the proportion between fixed interest or dividend bearing funds & non-fixed interest or dividend bearing funds in the total capacity employed in the business. The fixed interest or dividend bearing funds include the funds provided by the debenture holders & preference shareholders. Non-fixed interest or dividend bearing funds are the funds provided by the equity shareholders. The amount, therefore, includes the Equity Share Capital & other Reserves. A proper proportion between the two funds is necessary in order to keep the cost of capital at the minimum.

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The capital gearing ratio can be ascertained as follows:

 

Funds bearing fixed interest or fixed dividend

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Equity Shareholder’s Funds

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We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

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