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Picture

7.6 Leverage / Gearing: An Overview

Leverage, also known as Gearing, refers to the value of the assets on hand that has been financed using debt (liabilities).

The formula* looks like this:   (Total Liabilities / Total Assets) x 100 

* The "/" sign signifies division: thus Total Liabilities divided by Total Assets...

Debt is a way for a business to control more assets than it otherwise could (without the debt finance). Of course, the business must be able to service that debt, and the return on the new investment in assets should be worthwhile.
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  • Home
  • Color-Accounting-Bootcamp
    • Benefits
    • 0. Introduction
    • 1. Funding Butterfly
    • 2. BaSIS Framework
    • 3. Classic Tx - v6.0X >
      • Tx01. Loan
      • Tx02. Contributed equity
      • Tx03. Repay loan
      • Tx04. Purchase equipment
      • Tx05. Purchase inventory
      • Tx06. Cash Sale COS
      • Tx07. Window cleaner
      • Tx08. Credit Sale COS
      • Tx09. Shop cleaning
      • Tx10. Gift card
      • Tx11. Account received
      • Tx12. Prepaid Sale COS
      • Tx13. Prepaid advertising
      • Tx14. Depreciation
      • Tx15. Advertising
      • Tx16. Pay supplier
    • 3. Classic Tx PizzaBox >
      • Tx01. Loan
      • Tx02. Contributed equity
      • Tx03. Repay loan
      • Tx04. Purchase equipment
      • Tx05. Purchase inventory
      • Tx06. Cash Sale COS
      • Tx07. Window cleaner
      • Tx08. Credit Sale COS
      • Tx09. Shop cleaning
      • Tx10. Gift card
      • Tx11. Account received
      • Tx12. Prepaid Sale COS
      • Tx13. Prepaid advertising
      • Tx14. Depreciation
      • Tx15. Advertising
    • 4. Summary learnings
    • 5. Business narrative
    • 6. Extenders
  • Virtual Learning
  • Teachers
  • Store
  • More
    • SeanStuff
    • Color Accounting
    • Curriculum Approach >
      • Menu page
    • Support
    • Gallery
    • LMS plans
    • Contact Us
    • Newsletter
    • Legal notices >
      • IP Rights