Leverage
Use of borrowed capital to amplify potential returns (or losses).
Detailed Description
Leverage
What is leverage in business terms?
Leverage refers to the use of borrowed capital or debt to increase the potential return on investment.
What are the two main types of leverage?
The two main types of leverage are financial leverage and operating leverage.
How does leverage work in real estate?
In real estate, leverage allows investors to finance property purchases using mortgages, enabling them to control larger assets with less capital.
What are leverage ratios?
Leverage ratios are financial metrics that assess the level of debt a company uses relative to its equity or assets.
What are the risks associated with leverage?
The risks of leverage include magnified losses, financial distress, limited financial flexibility, and increased volatility in earnings.