September 19, 2019
What is the Right Level of Gearing for a Company?

Understanding the benefits and risks of debt are crucial in effectively analysing listed companies.

As we exited the global financial crisis ten years ago, many individual investors began a long and painful process of deleveraging. Contrasting this however were businesses, which began moving in the opposite direction by loading up on cheap debt. So far this theme has very much been a global phenomenon. In the United States, corporate debt has now reached a record high level, whilst businesses in China have gone on an even bigger borrowing binge.

The Australian story is more mixed, with corporate debt levels still sitting at relatively comfortable levels, in contrast to the highly indebted positions which Australian householders find themselves in.

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