financial gearing的意思|示意

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Financial gearing (or leverage) is a term used to describe a company's use of debt to finance its operations. It is a measure of the extent to which a company has taken on additional debt to finance its activities.

A company that has a high financial gearing ratio has a higher degree of borrowing, meaning that it has taken on a larger proportion of its capital from debt, as opposed to equity. This means that the company has a higher level of financial risk since it is more reliant on debt to finance its operations.

Companies use financial gearing as a way to boost their returns. By taking on additional debt, companies can leverage their returns as the additional funds can be used to pay for more assets or investments. This in turn can lead to higher profits and increased earnings.

However, this also means that the company is more exposed to risk, as it will have to pay interest on the additional debt and repay the principal at maturity. This means that if the investment does not generate the yields expected, the company may find it difficult to repay its debts.

In general, companies should aim to maintain an appropriate level of financial gearing. This should be decided based on the company’s risk appetite and the level of risk it is comfortable with taking on. It is important to remember that an excessively high financial gearing can be dangerous, resulting in the company facing insolvency if the investments fail to generate the returns expected.