Question 11
Business FinanceWhen a company uses more of loans than equity to finance its business, the company is said to be
- A.bankrupt
- B.solvent
- C.highly geared
- D.in a strong liquid position.
Show the answer and explanation
Answer: C (highly geared)
Explanation
Gearing compares borrowed capital with equity; a company that relies mostly on loans is highly geared.