What is meant by the term 'gearing'?

Gearing is expressed as a percentage and shows how much capital a business borrows. A company which is highly geared typically has a rate of higher than 50%, whilst a low geared business will have a gearing rate of less than 25%. Gearing is calculated by dividing long term loans (loans which you owe for 12 months or more) divided by equity, X100 (%).