Degearing

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DEFINITION of 'Degearing'

The action of a company altering its capital structure by replacing long-term debt with equity, thereby easing the burden of interest payments and also increasing management's flexibility.

BREAKING DOWN 'Degearing'

A company is highly geared or leveraged when a large portion of its capital structure is made up of long-term debt. Degearing is a movement away from this capital structure in the effort to decrease financial risk.

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