Search results
- DictionaryLev·er·age/ˈlev(ə)rij/
noun
- 1. the exertion of force by means of a lever or an object used in the manner of a lever: "my spade hit something solid that wouldn't respond to leverage"
- 2. the ratio of a company's loan capital (debt) to the value of its common stock (equity).
verb
- 1. use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable: "without clear legal title to their assets, they own property that cannot be leveraged as collateral for loans"
- 2. use (something) to maximum advantage: "the organization needs to leverage its key resources"
People also ask
What does lever mean?
What does leverage mean?
What does 'highly leveraged' mean?
What is financial leverage?
Learn the noun and verb meanings of leverage, as well as synonyms, examples, and word history. Leverage can refer to the action of a lever, the use of credit, or the exploitation of something for gain.
Learn the meaning of leverage as a noun and a verb in different contexts, such as action, power, business, and finance. See how to use leverage in sentences and phrases with synonyms and related words.
Learn the meaning of leverage as a noun and a verb in different contexts, such as action, power, business, and finance. See how to use leverage in sentences and phrases with synonyms and related words.
to use (a quality or advantage) to obtain a desired effect or result: She was able to leverage her travel experience and her gift for languages to get a job as a translator. to provide with leverage: The board of directors plans to leverage two failing branches of the company with an influx of cash.
- What Is Financial Leverage?
- Understanding Financial Leverage
- How to Calculate Financial Leverage
- Advantages and Disadvantages of Financial Leverage
- Financial Leverage vs. Margin
- Example of Financial Leverage
- The Bottom Line
- GeneratedCaptionsTabForHeroSec
Financial leverage is the concept of using borrowed capital as a funding source. Leverage is often used when businesses invest in themselves for expansions, acquisitions, or other growth methods. Leverage is also an investment strategy that uses borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase th...
Leverage is usingdebt or borrowed capitalto undertake an investment or project. It is commonly used to boost an entity's equity base. The concept of leverage is used by both investors and companies: 1. Investors use leverage to significantly increase the returns that can be provided on an investment. They leverage their investments using various in...
There is an entire suite of leverage financial ratios used to calculate how much debt a company is leveraging in an attempt to maximize profits. Here are several common leverage ratios.
Advantages
Some investors and traders use leverage to amplify profits. Trades can become exponentially more rewarding when your initial investment is multiplied by additional upfront capital. Using leverage also allows you to access more expensive investment options that you wouldn't otherwise have access to with a small amount of upfront capital. Leverage is best used in short-term, low-risk situations where high degrees of capital are needed. For example, during acquisitions or buyouts, a growth compa...
Disadvantages
If investment returns can be amplified using leverage, so too can losses. Using leverage can result in much higher downside risk, sometimes resulting in losses greater than your initial capital investment. On top of that, brokers and contract traders often charge fees, premiums, and margin rates and require you to maintain a margin account with a specific balance. This means that if you lose on your trade, you'll still be on the hook for extra charges. Leverage also has the potential downside...
Margin is a special type of leverage that involves using existing cash or securities as collateral to increase one's buying power in financial markets. Margin allows you to borrow money from a broker for a fixed interest rate to purchase securities, options, or futurescontracts in anticipation of receiving substantially high returns. You can use ma...
Consider a company formed with a $5 million investment from investors. This equity is the money the company can use to operate. If the company uses debt financingand borrows $20 million, it now has $25 million to invest in business operations and more opportunities to increase value for shareholders. However, it would have a high debt-to-equity rat...
There are several ways that individuals and companies can boost their equity base. Financial leverage is one of these methods. For businesses, financial leverage involves borrowing money to fuel growth. It allows investors to access certain instruments with fewer initial outlays. Because of the risks of using leverage, it's important to compare the...
Financial leverage is the use of borrowed capital to increase the potential return of an investment or project. Learn about the different types of leverage, how to calculate them, and why they are important for investors and companies.
If you have leverage, you hold the advantage in a situation or the stronger position in a contest, physical or otherwise. The lever is a tool for getting more work done with less physical force. With the right leverage, you might be able to lift a heavy box.
Learn the meaning of leverage as a noun in different contexts, such as influence, mechanics, finance and business. See pictures, pronunciation, collocations and usage notes for each sense of leverage.
