Financial leverage

This refers to a business incurring debt, typically to increase its assets.

Most frequently it involves borrowing money, either through loans or equity sale, in order to buy more assets in the expectation that the revenue generated by the new asset will generate sufficient income to both offset the cost of borrowing and also increase overall profit. The level of financial leverage demonstrates how much risk the business is running by comparing its debt with its value.

Financial leverage is a term normally found in strategic and financial management.

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