Which type of gearing relates to the extent to which the firm's total costs are fixed?
A) Capital gearing
B) Leveraged gearing
C) Operating gearing
D) Financial gearing

Question

Quizplus · Accepted Answer

Operating gearing relates to the extent to which a firm's total costs are fixed. This type of gearing is important in determining the firm's breakeven point, level of risk, and potential for profitability. Capital gearing refers to the mix of debt and equity financing used by the firm, leveraged gearing refers to the use of debt to increase returns to shareholders, and financial gearing is closely related to capital gearing and refers to the use of debt to finance the firm's operations.

Which Type of Gearing Relates to the Extent to Which