Leverage results from using borrowed capital as a source of funding when investing to expand a firm's asset base and generate returns on risk capital.
 | | Term of the Day | Words to Know | | |  | | Leverage | | Leverage results from using borrowed capital as a funding source when investing to expand the firm's asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets. | | Read More » | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Borrowed Capital | | Borrowed capital is money that is borrowed and used to make an investment, differing from equity capital, which is owned by the company and shareholders. | | Read More » | | | Margin | | Margin refers to the difference between the total value of securities held in an investor's account and the amount borrowed from a broker to buy securities. | | Read More » | | | Debt Financing | | Debt financing occurs when a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and institutional investors. | | Read More » | | | Gearing Ratio | | The gearing ratio is a measure of financial leverage that indicates the degree to which a firm's operations are funded by equity versus creditor financing. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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