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.

RELATED TERMS
  1. Capitalization Structure

    Capitalization structure refers to the proportion of debt and ...
  2. Corporate Capital

    Corporate capital refers to the assets a business has available ...
  3. Long-Term Debt To Capitalization ...

    A ratio showing the financial leverage of a firm, calculated ...
  4. Structured Note

    A structured note is a debt obligation that contains an embedded ...
  5. Total Debt-to-Capitalization Ratio

    An indicator that measures the total amount of debt in a company’s ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements ...
Related Articles
  1. Investing

    Target Corp: WACC Analysis (TGT)

    Learn about the importance of capital structure when making investment decisions, and how Target's capital structure compares against the rest of the industry.
  2. Investing

    The Optimal Use Of Financial Leverage In A Corporate Capital Structure

    The amount of debt and equity that makes up a company's capital structure has many risk and return implications.
  3. Investing

    Evaluating a Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
  4. Investing

    Gilead Stock: Capital Structure Analysis (GILD)

    Analyze the capital structure of Gilead Sciences to understand the impacts of debt and equity financing. Identify trends and the major drivers of those trends.
  5. Investing

    Disney Stock: Capital Structure Analysis (DIS)

    Learn about Disney's capital structure and why the company can afford to be more aggressive with its current level of debt exposure.
  6. Investing

    Yahoo Stock: Capital Structure Analysis (YHOO)

    Learn about Yahoo's capital structure, including whether or not a decline in year-over-year earnings is leading the company to use more debt.
  7. Investing

    Google Stock: Capital Structure Analysis (GOOGL)

    Analyze Alphabet's capital structure to determine how it has changed over time and how it compares to similar companies.
  8. Investing

    GM Stock: Capital Structure Analysis

    Learn why GM's enterprise value increased, and get an update on the company's capital structure, including equity and debt capitalization.
  9. Investing

    Twitter Stock: Capital Structure Analysis (TWTR)

    Analyze Twitter's capital structure to understand the importance of equity and debt financing. Identify trends in financial leverage and enterprise value.
RELATED FAQS
  1. What are the benefits and shortfalls of the Herfindahl-Hirschman Index?

    Learn about the differences between equity and debt financing and how they impact financials. Find out how businesses determine ... Read Answer >>
  2. Why would a company use a form of long-term debt to capitalize operations versus ...

    Learn about the different consequences of using long-term debt versus equity to raise capital for business activity, and ... Read Answer >>
  3. What are the different ways corporations can raise capital?

    Find out about raising capital for corporations with debt and equity capital. Learn how interest and dividend payments factor ... Read Answer >>
  4. What is capital structure theory?

    Discover capital structure theory as it relates to financial management and the methods in which companies attempt to raise ... Read Answer >>
  5. What is the difference between the gearing ratio and the debt-to-equity ratio?

    Dive deeper into gearing ratios: what are they, how are they used and why the debt to equity ratio is one of the most popular ... Read Answer >>
  6. What is the difference between cost of debt capital and cost of equity?

    Learn about how the costs of debt and equity capital differ and how to calculate each using interest and tax rates and stock ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center