Gearing ratio indicates the financial risk of a company. The higher the gearing ratio represents the high percentage of debt to equity. Sainsbury past and present gearing ratios have always stayed relatively low; the gearing ratio can be classed as low if it stays below 50%. These ratios indicate that there is lower risk to the company. On the other hand, Tesco gearing ratio has faced a massive increase in 2015, this isn’t good for Tesco as they are now at a high financial risk. “Interest coverage ratio is used to determine how easily a company can pay for their interest expenses. When the company has interest cover ratio lower than 1, in order to meet the difference or borrow more, the company have to reserve some cash, because if is lower in a single month, it will be meet bankrupt” (Investopedia, 2016). In 2014 and 2013, Sainsbury has good interest coverage ratio that is 6.82 and 6.17 respectively, but in 2015, it drops to 0.6. But for Tesco the interest cover rises in 2015 comparing with previous years. From the above results, it can be said that Tesco are in a better position to pay their interest expenses due to their greater profitability.