Which type of gearing is concerned with the proportion of the annual income that is devoted to the prior claims of debt holders?
A) Operating gearing
B) Financial gearing
C) Capital gearing
D) Income gearing

Question

Quizplus · Accepted Answer

Income gearing, also known as fixed charges coverage ratio, measures the proportion of a company's income that is used to pay for interest and other fixed charges related to debt. It is calculated by dividing earnings before interest and taxes (EBIT) by the sum of interest and other fixed charges. This gearing ratio indicates a company's ability to meet its debt obligations using its current income.

Which Type of Gearing Is Concerned with the Proportion of the Annual