financial-leverage

Vocabulary Word

Definition

'Financial leverage' means using debt to finance an investment. The goal is to increase the earnings that could be gained from the investment, but it also involves more risk.

Examples in Different Contexts

For investment strategy, 'financial leverage' involves using debt to supplement investment in assets. An investment manager might say, 'Financial leverage can magnify profits but also increases the risk of loss.'

Practice Scenarios

Business

Scenario:

We're looking at potential avenues to accelerate our growth. It's imperative that we explore every possible route.

Response:

Don't you think, using financial leverage might be a good option to speed up our company’s growth?

Investment

Scenario:

I'm thinking of expanding my portfolio, and I'm open to slightly higher-risk options.

Response:

Let's look at using some sort of financial leverage for investment diversification.