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Nearby Terms

level
leverage
leveraged
levy

leverage

definition

The amount of debt used by a business (or an investor) to control a large financial position with a relatively small amount of capital. Businesses often use bank loans, bonds, and other debt instruments to increase their ability to expand or develop new products. Investors use margin debt as leverage to take a larger position than would be possible with cash funding. Highly leveraged companies (and investors) face increased risk from unforeseen events.

Related Terms

 • margin trading  • Put on a call  • credit balance  • prime brokerage  • total return  • Put on a put  • Gearing  • account
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