Question 8.RQ.1: How might a business find out whether a particular planned l...

To fi nd out whether or not a planned level of gearing is likely to be acceptable to investors, the managers of a business could look at the levels of gearing in similar businesses operating within the same industry. If the business adopts a much higher level of gearing than these businesses, there may be problems in raising long-term funds. The managers could also discuss the proposed level of gearing with prospective investors such as banks and financial institutions to see whether they regard the level of gearing as being acceptable.