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Finance Dictionary and Glossary of Investment Terms
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 their investment and often there are tax advantages associated with borrowing. also called leverage.
e of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.