Understanding Gearing Ratio and How to Alter It

The video tutorial explains the concept of the gearing ratio, which is the ratio of non-current liabilities to capital employed, expressed as a percentage. It provides a live example to calculate the gearing ratio and discusses the implications of low and high gearing levels on business stability. The tutorial also explores how economic conditions, such as booms and recessions, affect gearing. Finally, it outlines strategies for reducing a high gearing ratio, including paying off loans, issuing more shares, and retaining profits.

Discuss the difference between low and high levels of gearing.

What are the implications of having a high gearing ratio during a recession?