Difference between revisions of "Leverage"

From MarketsWiki
Jump to: navigation, search
Line 1: Line 1:
 
{{helpAddContent}}  
 
{{helpAddContent}}  
  
The use of [[borrow]]ed [[fund]]s along with owned funds for [[investment]] is called leverage. The ratio of borrowed funds to own funds (or debt to equity) is called the [[leverage ratio]].  
+
The use of [[borrow]]ed [[fund]]s along with owned funds for [[investment]] is called leverage. The ratio of borrowed funds to own funds (or debt to equity) is called the [[leverage ratio]].<ref>{{cite web|url=http://www.sjsu.edu/faculty/watkins/leverage.htm|name=Capital Leverage: Financial Intermediation|org=San Jose State University Economics Department|date=December 9, 2008}}</ref>
 
+
 
Leverage is the use of various [[financial instrument]]s, including [[options]] and [[futures]].
 
Leverage is the use of various [[financial instrument]]s, including [[options]] and [[futures]].
  

Revision as of 09:59, 9 December 2008


The use of borrowed funds along with owned funds for investment is called leverage. The ratio of borrowed funds to own funds (or debt to equity) is called the leverage ratio.[1]

Leverage is the use of various financial instruments, including options and futures.

Leverage also refers to the amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Companies use debt to finance their operations. This increases their leverage because it enables them to invest in business operations without increasing equity.


Template:Infobox Midpage Need Sponsor Right

References

  1. Capital Leverage: Financial Intermediation. San Jose State University Economics Department.