financial leverage

Definition

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 new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders' return on investment and often there are tax advantages associated with borrowing. also called leverage.

Use financial leverage in a sentence

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.

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degree of financial leverage (DFL) deleverage