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Understanding Capital Gearing and Trading On Equity
By qwcdirect | April 7, 2010
There are always some effective ways that help you to get better returns and enjoy financial stability in the long run. Capital Gearing and Trading on equity are also two such ways which you can use with precision to enjoy lucrative returns on your investment. They are very simple and absolutely free of any hassle.
In simple terms, capital gearing is the ratio between different kinds of securities that a company has and the total amount of capitalization. High capital gearing is possible when the share of equity to the total capitalization is relatively small. The opposite is also possible when the share of the equity and securities is more in the total structure of the capital. Usually, the capital gearing is calculated by determining the ratio between the equity capital and the securities.
Now, comes the term “trading on equity”. It is a type of business strategy where the management tries to add to the funds by issuing securities which have a fixed interest rate. The interest is also known as dividend. However, this dividend should be less than the average revenue that the company earns.
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