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What does Leverage Mean?

Leverage is the use of borrowed capital or debt to try and increase the potential return of an investment.

An individual might leverage an investment account by going on margin to purchase additional securities, whereas the amount of debt used to finance a company’s assets is considered to be that company’s level of leverage. A firm with significantly more debt than equity is considered to be highly leveraged.

Keywords: leverage, margin, return on investment (ROI), debt financing, borrowed capital,