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explain what is meant by the term 'highly geared' in financial management

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What is meant by highly geared company?

the business has a lot of money tied up in loans and interest.


What is the difference between a highly geared company and a lowly geared company?

Gearing is a measure of how big a company's borrowings are, relative to its size. There are different methods of calculating gearing but the simplest and most effective is the debt-to-equity ratio. This shows how much the company owes (debt) compared to its size (equity) and is calculated by dividing total borrowings (current and long term) by net assets and is expressed as a percentage. A company with a high percentage is said to be highly geared and has large borrowings (normally from the bank) relative to its size and vice versa for a company with a low percentage.


Is it a good time to be highly geared?

Highly geared tends to be used in the UK when someone wants to talk about using a high level of debt or leverage. It is never a good time to be highly geared if you lack the means to service the debt. If you have a lot of income, more than would be needed to cover the debt service even if there are some speed bumps in the future means that you are much less likely to have issues. Another time when it becomes a problem is when someone is using debt to buy an asset that is not likely to hold its value. If you could predict that the asset would rise in value and the cash flow is not an issue (income needed to service the debt) then using gearing can be rather profitable. So, the real to when to use gearing is strongly related to why someone is using gearing. Debt on its own is not good or bad. It is a tool to be used correctly. There is a time and place for high gearing. There are other times when lower levels of gearing is the right solution.


What is capitalization and capital structure?

capitalization means amount of capital invested in a business.it is used in the case of companies only.it include all the sources of fund used in an organization. capital structure is a qualitative term that gives the ratio in which the total capital is contributed by different sources.it may be high geared or low geared and influenced by external factors.


What does the concept of retail banking mean?

Retail banking is geared towards individual customers. Retail banking institutions provide personal banking services such as savings and checking accounts, bill pay services, debit, and credit cards, as well as mortgages and loans. They are not geared towards large businesses, but may offer services to small businesses.

Related Questions

What is meant by highly geared company?

the business has a lot of money tied up in loans and interest.


As debt is a cheaper source of finance than equity companies should be highly geared in order to maximise their market value?

debt


Which is correct geared at or geared toward?

Both "geared at" and "geared toward" are commonly used and considered correct in informal contexts. However, "geared toward" is more widely accepted and considered more formal than "geared at."


Highly visible patrols that are geared toward detecting crimes in progress and responding to citizen calls?

?? Saturation patrol ?? Unknown what answer the questioner is looking for.


What is the anagram of geared?

An anagram of geared is agreed.


When did Geared happen?

Geared happened in 2009.


What is the difference between a highly geared company and a lowly geared company?

Gearing is a measure of how big a company's borrowings are, relative to its size. There are different methods of calculating gearing but the simplest and most effective is the debt-to-equity ratio. This shows how much the company owes (debt) compared to its size (equity) and is calculated by dividing total borrowings (current and long term) by net assets and is expressed as a percentage. A company with a high percentage is said to be highly geared and has large borrowings (normally from the bank) relative to its size and vice versa for a company with a low percentage.


When was Geared created?

Geared was created on 2009-08-08.


What are the advantages of using an internally geared bike over a traditional geared bike?

Internally geared bikes offer advantages such as low maintenance, protection from elements, and ease of use compared to traditional geared bikes.


How would you use geared in a sentence?

Those two are not geared to production. The engine exploded because the transmission was not geared properly.


Features of biomedical model?

Some features of the biomedical model of health are specialist medical services are valued highly, scientific methodology is highly valued in research, and health services are geared towards the treating of the sick. Also there is the absence of disease and that health is based on the understanding of how diseases arise.


What is a Banjo Minnow used for?

A Banjo Minnow is a type of highly specialized artificial lure used in fresh water fishing. The lure is geared more for large mouth fish such as large mouthed bass.