Gearing refers to the use of:

Question

Quizplus · Accepted Answer

Gearing, also known as leverage, refers to the use of debt financing to increase the potential return on investment. By using borrowed funds to finance projects or investments, companies can potentially generate higher profits than they would using only equity financing. However, increased debt also raises the risk of financial distress or bankruptcy. Preference shares are a type of equity financing, not debt financing, and are therefore not considered part of gearing.

Gearing Refers to the Use Of