How to increase gearing ratio?

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Peavler 0 Comments

It can be a simple thing but how can a company increase it’s gearing ratio and what will it mean? Is it bad or good to increase the gearing ratio?

2 Answers

score 0 · Answer 1 · 2012-12-02T23:03:27+00:00

You can increase your gearing ratio by either increasing your debt (the interest bearing debt such as bonds, bank loans, redeemable preference shares etc) or by reducing your share capital (repurchase and subsequent cancellation of the shares for example). You can also do both of them of course!

score 0 · Answer 2 · 2013-04-21T09:31:51+00:00

Just to add that the external debt can be increased by additional bank loans or by issuing bonds.

The capital can be decreased if the company for example buys back some of it’s shares (repurchase) and then cancels these shares.