Term of the Day financial leverage

Term of the Day

financial leverage

The degree to which an investor or business is utilizing borrowed money.Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find newlenders in the future. Financial leverage is not always bad, however; it canincrease the shareholders‘ return on investment and often there are tax advantages associated with borrowingalso called leverage.
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Usage Example
While many companies use debt to help finance, some try to avoid using debt as it increases their degree of financial leverage and negatively affects the company’s bottom line.