Gearing can be thought of as leverage, where it's measured by various leverage ratios, such as the debt-to-equity (D/E) ratio. A high D/E ratio means a company is more geared and therefore more risky. This is because the company is using more borrowed money to finance its operations, so if things go wrong, it will have to pay back its debts quickly with not much room for manoeuvre.A low D/E ratio means a company has less gearing and is seen as being safer. It can afford to take on more debt without putting itself at too much risk. However, this does not mean that a low D/E ratio company can't fail – it could still run into trouble if its revenues fall too far below its costs.
