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HandWiki. Leverage. Encyclopedia. Available online: https://encyclopedia.pub/entry/28024 (accessed on 14 September 2026).
HandWiki. Leverage. Encyclopedia. Available at: https://encyclopedia.pub/entry/28024. Accessed September 14, 2026.
HandWiki. "Leverage" Encyclopedia, https://encyclopedia.pub/entry/28024 (accessed September 14, 2026).
HandWiki. (2022, September 29). Leverage. In Encyclopedia. https://encyclopedia.pub/entry/28024
HandWiki. "Leverage." Encyclopedia. Web. 29 September, 2022.
Leverage
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The content is sourced from: https://handwiki.org/wiki/Finance:Leverage

In finance, leverage (or gearing in the United Kingdom and Australia) is any technique involving borrowing funds to buy things, hoping that future profits will be many times more than the cost of borrowing. This technique is named after a lever in physics, which amplifies a small input force into a greater output force, because successful leverage amplifies the comparatively small amount of money needed for borrowing into large amounts of profit. However, the technique also involves the high risk of not being able to pay back a large loan. Normally, a lender will set a limit on how much risk it is prepared to take and will set a limit on how much leverage it will permit, and would require the acquired asset to be provided as collateral security for the loan. Leveraging enables gains to be multiplied. On the other hand, losses are also multiplied, and there is a risk that leveraging will result in a loss if financing costs exceed the income from the asset, or the value of the asset falls.

leverage leveraging gearing

References

  1. Mock, E. J., R. E. Schultz, R. G. Schultz, and D. H. Shuckett, Basic Financial Management (1968).
  2. Grunewald, Adolph E. and Erwin E. Nemmers, Basic Managerial Finance (1970).
  3. Ghosh, Dilip K. and Robert G. Sherman (June 1993). "Leverage, Resource Allocation and Growth". Journal of Business Finance & Accounting: pp. 575–582. 
  4. Lang, Larry, Eli Ofek, and Rene M. Stulz (January 1996). "Leverage, Investment, and Firm Growth". Journal of Financial Economics: pp. 3–29. 
  5. Bodie, Zvi, Alex Kane and Alan J. Marcus, Investments, McGraw-Hill/Irwin (June 18, 2008)
  6. Chew, Lillian (July 1996). Managing Derivative Risks: The Use and Abuse of Leverage. John Wiley & Sons. 
  7. Van Horne (1971). Financial Management and Policy. Englewood Cliffs, N.J., Prentice-Hall. ISBN 9780133153095. https://archive.org/details/financialmanagem0002edvanh. 
  8. Weston, J. Fred and Eugene F. Brigham, Managerial Finance (1969).
  9. Brigham, Eugene F., Fundamentals of Financial Management (1995).
  10. Weston, J. Fred and Eugene F. Brigham, Managerial Finance (2010).
  11. Brigham, Eugene F., Fundamentals of Financial Management (1995)
  12. "Financial Leverage". http://www.readyratios.com/reference/debt/financial_leverage.html. 
  13. Damodaran (2011), Applied Corporate Finance, 3rd ed., pp. 132–133>
  14. Li, Rong-Jen and Glenn V. Henderson, Jr., "Combined Leverage and Stock Risk," Quarterly Journal of Business & Finance (Winter 1991), pp. 18–39.
  15. Huffman, Stephen P., "The Impact of Degrees of Operating and Financial Leverage on the Systematic Risk of Common Stock: Another Look," Quarterly Journal of Business & Economics (Winter 1989), pp. 83–100.
  16. Dugan, Michael T., Donald Minyard, and Keith A. Shriver, "A Re-examination of the Operating Leverage-Financial Leverage Tradeoff," Quarterly Review of Economics & Finance (Fall 1994), pp. 327–334.
  17. Darrat, Ali F.d and Tarun K. Mukherjee, "Inter-Industry Differences and the Impact of Operating and Financial Leverages on Equity Risk," Review of Financial Economics (Spring 1995), pp. 141–155.
  18. Ong, Michael K., The Basel Handbook: A Guide for Financial Practitioners, Risk Books (December 2003)
  19. Saita, Francesco, Value at Risk and Bank Capital Management: Risk Adjusted Performances, Capital Management and Capital Allocation Decision Making, Academic Press (February 3, 2007)
  20. Tarullo, Daniel K., Banking on Basel: The Future of International Financial Regulation, Peterson Institute for International Economics (September 30, 2008)
  21. Lehman Brothers Holdings Inc Annual Report for year ended November 30, 2007 https://www.sec.gov/Archives/edgar/data/806085/000110465908005476/a08-3530_110k.htm#Item6_SelectedFinancialData_003911
  22. Report of Anton R. Valukas, Examiner, to the United States Bankruptcy Court, Southern District of New York, Chapter 11 Case No. 08-13555 (JMP).
  23. Merrian-Webster's Dictionary of Law. Merriam-Webster. June 2011. ISBN 978-0877797197. 
  24. "leverage." Merriam-Webster's Dictionary of Law. Merriam-Webster, Inc. 7 June 2011. Dictionary.com http://dictionary.reference.com/browse/leverage
  25. "leverage." Online Etymology Dictionary. Douglas Harper, Historian. 7 June 2011. Dictionary.com http://dictionary.reference.com/browse/leverage
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