financial leverage
Borrowed money multiplier
Financial leverage is the use of borrowed money to amplify potential returns on an investment.
A company with high leverage has taken on significant debt relative to its equity: The firm's financial leverage made it vulnerable during the downturn.
The strategy magnifies both gains and losses—borrowed funds can multiply profits when things go well, but debt obligations remain fixed when they don't.
- interest rate riskPotential loss from yield changes
- overleveragingExcessive debt accumulation
- cost of capitalRequired return on investment
- margin tradingInvesting with borrowed capital
- real estate investmentCapital placed in property
borrowed money · credit lines · gearing · house of cards · systemic risk · too big to fail · private equity · margin call · derivatives · hedge funds · skin in the game · risk appetite · double down · securitization · mergers and acquisitions · bankruptcy · venture capital · volatility
- corporate financecost of capital, investment, capital markets, NPV, shareholder
- leveragegearing, margin, margin trading, margin call, margin account
- creditcredit card, credit score, credit limit, credit cards, credit scores
- lendingloans, borrower, approval, lenders, bank loan
- business fundingbank loans, venture capital, angel investor, seed funding, bank loan
- financial healthfiscal health, solvent, insolvent, insolvency, liquidity
financial leveragedeleveraging
Lowering financial leverage ratios
capital preservation · risk mitigation · risk aversion · diversification
financial, finance, finances, financed, financing, financier, financiers, financially, leverage