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In risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock.
You often see the debt to equity ratio called the gearing ratio, although technically it would be more correct to refer to it as a gearing ratio. Gearing simply refers to financial leverage. Gearing ratios focus more heavily on the concept of leverage than other ratios used in accounting or investment analysis.his difference is embodied in the difference between the debt ratio and the debt to equity ratio. Put another way, leverage refers to the use of debt. Gearing is a type of leverage analysis that incorporates owner's equity, often expressed as a ratio in financial analysis.