LEVERAGE

The term leverage pertains to an investment strategy that makes use of borrowed money, to be more specific, the use of a selection of financial instruments or capital that had been borrowed. This is done so that the potential of a return of an investment would be increased.

Leverage may also refer to the amount of debt that a firm makes use of so as to finance assets. It effectively provides financial opportunities for a company by making it appear more financially enticing so that investors and patrons of a company may be invited to invest.

Buying fixed assets or taking money from another company or individual entity through loans to generate profits is a simple example of leverage.