Gearing Ratio Calculator
Calculate your gearing ratio to measure financial leverage.
Enter total debt and shareholders' equity to see how much your business relies on debt financing.
The gearing ratio measures how much of a business is funded by debt versus equity. High gearing amplifies both returns and risk. Low gearing is safer but may signal the company is leaving cheap leverage on the table.
Gearing Ratio = (Total Debt / Shareholders Equity) x 100
A gearing ratio of 50% means for every dollar of equity, the company owes 50 cents of debt. At 200%, debt is twice the equity — the company is highly leveraged.
Net gearing subtracts cash from debt, giving a cleaner view of actual exposure:
Net Gearing = ((Total Debt - Cash) / Shareholders Equity) x 100
A company holding $200M in debt but $180M in cash has very different risk than one holding the same debt with $10M in cash. Net gearing captures that.
The debt-to-assets ratio is a third useful cut:
Debt / Total Assets = Total Debt / (Total Debt + Equity)
This tells you what fraction of assets are financed by creditors rather than owners.
Benchmarks vary heavily by industry. Utilities and telecoms commonly run gearing above 100% because their cash flows are predictable and their assets are easy to pledge as collateral. Technology companies often run near zero — they have few hard assets and their earnings can evaporate quickly, so creditors demand equity buffers. Private equity-owned businesses routinely operate above 300% during the buyout period.
What counts as dangerous depends on the stability of operating cash flow. A company with lumpy, cyclical revenue at 100% gearing is far riskier than a regulated utility at 150%.