gearing

Vocabulary Word

Definition

'Gearing' is a term used in finance to explain how a company uses borrowed funds to finance its activities. It's like a business taking a loan to build its operations.

Examples in Different Contexts

In impact investing, 'gearing' assessment is pivotal. An investment advisor might declare, 'Assessing the gearing of social enterprises is vital to determine their financial health and resilience, influencing investment decisions for impact funds.'

Practice Scenarios

Finance

Scenario:

The financials reveal high reliance on borrowed funds, which could be risky in volatile markets.

Response:

You're right, we should construct a plan to reduce our gearing ratio to minimize risk.

Tech

Scenario:

The highly competitive environment calls for rapid expansion, but our funds are limited.

Response:

Maybe we could consider short-term gearing to finance our expansion and then progressively reduce the debt level.