ocr: Gearing. Ratio This ratio measures the relationship between loan capital and the total capital employed within the business. The term gearing refers to the proportion of the company'scapital employed represented by loan capital. The loan capital is often referred to as prior charge capital since the interest payments must be made from trading profits regardless of the level of trading profits actually achieved. Gearing Ratio- (Prior Charge Capital x 100% Capital Employed Inc our example, Gearing Ratio - E1,400 E3,400 x1 100% 41.18%0.
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