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In risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock.
1 The debt ratio measures the firm's ability to repay long-term debt by indicating the percentage of a company's assets that are provided via debt. 2  Debt ratio = Total debt / Total assets.  The higher the ratio, the greater risk will be associated with the firm's operation.