Leverage

Business, Legal & Accounting Glossary

Definition: Leverage


Quick Summary of Leverage


Alternative term for gearing, commonly used in the USA.




What is the dictionary definition of Leverage?

Dictionary Definition


  • n. the use of borrowed money to purchase real estate or business assets, usually involving money equaling a high percentage of the value of the purchased property.
  • v. to borrow most of the funds necessary as a loan against real estate to buy other real estate or business assets. The dangers of high leverage are over-appraisal of the property to satisfy a lender, a decline in the value of the property (which may have been purchased during a period of high inflation), high carrying costs (interest, insurance, taxes, maintenance) which exceed income, vacancies and/or inability to finance improvements to increase profits. Too often the result is the collapse of “paper” real estate empires which have been created by risky leveraging.
  1. A force compounded by means of a lever rotating around a pivot; see torque.
  2. By extension, any influence which is compounded or used to gain an advantage.
  3. finance The use of borrowed funds with a contractually determined return to increase the ability of a business to invest and earn an expected higher return, but usually at high risk.

Full Definition of Leverage


The ability to influence a system, or an environment, in a way that multiplies the outcome of one’s efforts without a corresponding increase in the consumption of resources. In other words, leverage is the advantageous condition of having a relatively small amount of cost yield a relatively high level of returns.

The use of debt financing, or property of rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage compared to the underlying stock because a given price change in the stock may result in a greater increase or decrease in the value of the option.


Synonyms For Leverage


financial leverage, operating leverage

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Leverage. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. August 05, 2021 https://payrollheaven.com/define/leverage/.
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Leverage. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/leverage/ (accessed: August 05, 2021).
American Psychological Association (APA):
Leverage. PayrollHeaven.com. Retrieved August 05, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/leverage/

Definition Sources


Definitions for Leverage are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 28th April, 2020 | 10 Views.