I'm not clear on the specifics of how changes in interest rates affect a highly geared company. Could someone explain? Thanks
Hi Danny Highly geared companies are going to be paying high amounts of interest each year to service their debts. If interest rates increase, the cost of servicing their debts increases and so their profits will fall (and vice versa if interest rates fall). So, highly geared companies are likely to find their profits are more sensitive to interest changes than those of companies with lower levels of gearing. Hope this helps Lynn
