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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005


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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
He complained that the CFPB "absolutely knew they had tremendous leverage over us" and was trying to change the policies of an industry it did not have the authority to regulate.
It is impossible to know how the counterfactual would have played out, but it seems extraordinarily unlikely the CFPB would have been able to extract $100 million and a change in Ally's business practices--let alone do so under the same time frame--except under conditions that gave the CFPB an extraordinary degree of regulatory leverage.
In the 1990s, the FCC used regulatory leverage to press Westinghouse into increasing the number of hours devoted to children's educational programming on CBS.
H2a: There is an influence of leverages on ROE consumers' product companies.
Ho: There is no influence of leverages (Operating Leverage and financial Leverage) on net profit in consumers' product companies.
HA: There is influence of leverages (Operating Leverage and financial Leverage) on net profit in consumers' product companies.
To address this drawback, we analyze a new breed of indicators based on the broadest possible span of banking activities and rely on the degree of total leverage, i.e., an elasticity concept of leverage.
In accounting and finance, leverage refers to the amount of debt--i.e., deposits and market-based financing other than equity--that banks use to finance their assets (loans, for instance).
The typical measure of bank leverage followed by analysts is the ratio of total assets to equity.
* Leverage and maximize the value of all PLM products and services.
One example of how LAI will leverage assets and improve efficiency and effectiveness in classroom-based courses, course managers will launch their course materials from the DAU learning asset repository (see Figure 5).
The tool will be developed in the ACC community of practice Simplify application and will greatly leverage relevant resources and expertise in the Logistics CoPs, continuous learning modules, and PBL course assets.