TOTAL GEARING


Its possible to obtain an assessment of the firms total gearing by combining its financial gearing and operating gearing so that the degree of total gearing (D.T.G) is equal to degree of operating gearing multiplied by degree of financial gearing.

D.T.G. = D.O.G. X D. F. G.

D.T.G. therefore measures the sensitivity (vulnerability) of EPS to changes in company’s sales.