FINANCIAL GEARING Definition

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FINANCIAL GEARING reflects any borrowing that the company may have undertaken. Operating income will become more volatile with increased financial gearing (borrowing). Thus the shares will have more risk attached to them. More borrowing, more risk. See GEARING and OPERATIONAL GEARING.

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OPPORTUNITY COST is widely used in business planning in evaluating capital investment. A company measures the projected return against the anticipated return it would receive on a highest yielding alternative investment that contains a similar risk profile.

IN THE RED means losing money; the opposite of "in the black."

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