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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  2. Gearing

    The level of a company’s debt related to its equity capital, ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Deleverage

    A company's attempt to decrease its financial leverage. The best ...
  5. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  6. Equity

    1. A stock or any other security representing an ownership interest. ...
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