underleveraged

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Underleveraged

Describing a company with too little debt. While it sounds strange, a company may be underleveraged because interest on bonds are usually tax deductible for the issuing company; thus, a bond issue can create higher earnings per share for stockholders. There is no metric for determining when a company is underleveraged and investors decide on it based on their personal perceptions.

underleveraged

Of, relating to, or being a firm that has insufficient debt in its capital structure. Because bond interest is deductible for tax purposes and is generally fixed in amount for a long period of time, some use of debt can often result in greater earnings per share for stockholders. Determining whether a company is underleveraged is usually a matter of opinion.
References in periodicals archive ?
bank customers conducted for FICO(NYSE:FICO), a leading predictive analytics and decision management software company, found that banks are under-leveraging their loyal customer bases, missing out on opportunities to increase top-line growth by cross-selling additional services.
Banks are recognizing that they have been under-leveraging the interaction between the teller and the customer," said Jim Hughes, Vice President and General Manager, Siebel Finance.
But firms are still under-leveraging the collaborative power of social media, with only about one-third of firms maintaining involvement in professional online communities.