Capital Gearing Ratio
Capital gearing ratio = (Capital Bearing Risk) : (Capital not bearing risk)
- Capital bearing risk includes debentures(risk is to pay interest) and preference capital (risk to pay dividend at fixed rate).
- Capital not bearing risk includes equity share capital.
Therefore we can also say,
Capital gearing ratio= (Debentures+Preference share capital) : (Equity shareholders' funds)
Read more about this topic: Capital Structure
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