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In mechanics, gears are used to increase torque and to translate the force to other areas. In finance, a gearing ratio is a term referring the amount leverage being used, compared to the amount of equity.
A high gearing ratio is almost the same as a high debt-to-equity ratio. The gearing ratio is computed in a slightly different manner. Gearing is another word for leverage. High amounts of debt can spell trouble for a company down the road, and investors are wise to consider that.
One way to visualize this is to consider that if you have a lot of gears, you certainly want to avoid wrenches (lest you should get a “wrench in the gears”). Any downturn in the economy or decrease in cash flow could mean that the company is no longer able to fulfill its debt obligations, since it may have been funding its operating expenses with debt instead of income.
Before Lehman Brothers and Bear Sterns, probably the most well-known and publicized bankruptcy was the Enron scandal
Debt is money owed from one party or parties to another, plain and simple. Whether it’s money borrowed, loaned or credit
Accidental Death Benefits are paid only if the cause of death is deemed to be an accident. There are several exclusions
Regular pension payments are periodic distributions. This will be the default option on pension arrangements
The Federal Deposit Insurance Corporation (FDIC) is a government entity created by the Glass-Steagall Act of 1933
Federal income taxes are paid by individuals in proportion to their earnings, after reducing the considered earnings
When foreigners purchase shares of domestic companies to add diversification it is known as Foreign Portfolio Investment
Publication 515 serves as a guide for employers regarding the tax withholding requirements for nonresident alien employees
The Cup-and-Handle pattern is formed when a stock price initially declines and then rises to form a “U”like shape
Blockchain technology is a decentralized network structure used to obtain consensus on changes to a shared ledger