Leverage – Full Guide for Absolute Beginners
Have you ever wondered what the term 'leverage' really means? You've heard of it a bunch of times, but somehow you never knew the exact definition of it? Don't worry. You are not the only one. We are here to give you all the necessary information to help you understand leverage in the best possible way.
Leverage is an investment strategy where one uses borrowed money, capital of various financial instruments to increase the potential return of their investment. In other words, leverage results from using borrowed capital as a funding source. It happens when investing in expanding the firm's assets and generating returns on capital risk.
It refers to the ratio of a company's loan debt (capital) to the value of its ordinary shares. Simply put, it's the amount of debt that one company ...