leverage


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Related to leverage: Leverage ratio, Financial leverage

Leverage

The use of debt financing, or property of rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage compared to the underlying stock because a given price change in the stock may result in a greater increase or decrease in the value of the option. Also, commonly known as Gearing in Europe.

Leverage

1. To use debt to finance an activity. For example, one usually borrows money in the form of a mortgage to buy a house. One commonly speaks of this as leveraging the house. Likewise, one leverages when one uses a margin in order to purchase securities.

2. The amount of debt that has been used to finance activities. A company with much more debt than equity is generally called "highly leveraged." Too much leverage is thought to be unhealthy, but many firms use leverage in order to expand operations.

leverage

The use of fixed costs in order to increase the rate of return from an investment. One example of leverage is buying securities on margin. While leverage can operate to increase rates of return, it also increases the amount of risk inherent in an investment. See also financial leverage, operating leverage.

Leverage.

Leverage is an investment technique in which you use a small amount of your own money to make an investment of much larger value. In that way, leverage gives you significant financial power.

For example, if you borrow 90% of the cost of a home, you are using the leverage to buy a much more expensive property than you could have afforded by paying cash.

If you sell the property for more than you borrowed, the profit is entirely yours. The reverse is also true. If you sell at a loss, the amount you borrowed is still due and the entire loss is yours.

Buying stock on margin is a type of leverage, as is buying a futures or options contract.

Leveraging can be risky if the underlying instrument doesn't perform as you anticipate. At the very least, you may lose your investment principal plus any money you borrowed to make the purchase.

With some leveraged investments, you could be responsible for even larger losses if the value of the underlying product drops significantly.

leverage

see CAPITAL GEARING.

leverage

see CAPITAL GEARING

leverage

The effect borrowed money has on an investment;the concept of borrowing money to buy an asset that will appreciate in value, so that the ultimate sale will return profits on the equity invested and on the borrowed funds.

Example: Mark and Amy each have $100,000 to invest. They can buy rental houses for $100,000 per house and collect rent of $1,100 per month for each house. At the end of 5 years, they will be able to liquidate and sell their houses for $150,000 each. Amy uses leverage and Mark does not.

References in periodicals archive ?
In this article, we argue that, given the new banking environment, some of the measures of leverage currently used by policy-makers and regulators to define mandatory rules are to some extent unsatisfactory at tracking bank risk.
Headquartered in Tampa, FL, Leverage Digital Media is a digital marketing firm specializing in Custom Web Design & Development and Search Engine Marketing.
The lawyer added that days before the offence Leverage had been in
A major near-term DAU strategy is to integrate and leverage our learning assets generated by the elements of the PLM, maximizing the value of all assets to the AT&L knowledge worker.
For public firms, there is a U-shaped relationship between firm size and leverage. While leverage declines and equity rises with firm size for smaller public firms, very large public firms often have substantial leverage in the form of long-term debt.
The spin-off left Trinity as a focused rail manufacturing and leasing business that is smaller, less diversified and with higher financial leverage. The ratings incorporate a high level of cyclicality in Trinity's railcar manufacturing business, which saw sales declines of more than 30% in each of 2016 and 2017 before recovering by 17% in the first nine months of 2018.
Kapfidze continued, "Historical data shows that nationally leverage ratios increased from 2.30 in 2014 to 2.56 in 2017 as home prices rose faster than incomes.
Leveraging across two antitrust domains/ A regulator can leverage its power across distinct areas within a single policy domain.
o leverage rates (best estimate with uncertainty ranges) for public support for business and for support for universities/research institutions; o leverage rates (best estimate with uncertainty ranges) for different business sectors; o leverage rates (best estimate with uncertainty ranges) for direct support to business and indirect support to business (tax credits) and o leverage rates (best estimate with uncertainty ranges) for comparator countries, such as the us, france, germany and japan.
The Bangko Sentral ng Pilipinas (BSP) yesterday said the country's universal and commercial banks and their subsidiary banks and quasi-banks will have six months or until June to review and improve their ability to comply with the leverage ratio of no lower than five percent.
By thinking creatively, negotiators can find, build and deploy a wider range of leverage opportunities.
ETFs that leverage performance are still held in contempt by many individuals within the financial services industry.