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leverage definition - finance
  1. The amount of debt a company has. A highly-leveraged company has a relatively large amount of debt when compared to the level of assets it owns. Although becoming highly leveraged can create significant profits if things go according to plan, it can severely hamper a company that is caught in a slowing market or experiences unanticipated competition.
  2. To purchase stocks or other investments by using borrowed funds (on margin). An investor who borrows money from his or her broker to purchase stocks uses leverage in order to increase his or her potential gain. However, if the investment declines in value, then the amount of money the investor loses likely increases well.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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