Gearing ratios are financial ratios that compare some form of owner equity (or capital) to debt, or funds borrowed by a company.
“Gearing” is a measurement of the entity’s financial leverage, and demonstrates the degree to which a firm's activities are funded by its shareholders’ funds versus creditors’ funds.
The gearing ratio demonstrates the degree to which a firm's operations are funded by equity capital versus debt financing. Gearing ratios have more meaning when they are compared against the gearing ratios of other companies in the same industry.