Debt, gearing and who gets paid first

Read net debt and gearing as the same maths as a margin loan, and know where shareholders stand in a collapse.

Module 7 of 26, Reading a company’s numbers. Lesson 4 of 6, about 16 minutes.

The takeaway

Debt makes equity move harder: when assets fall, liabilities stay the same, so the loss hits equity first and cuts it deeper. In a wind-up, secured lenders are paid from their security first, then liquidation costs, employees and unsecured creditors, with shareholders last of all.

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Concepts in this lesson

• Leverage

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This lesson's module

• Reading a company’s numbers
• All 26 modules and 157 lessons