What Does Leverage Mean?


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Yooti Bhansali Profile
Yooti Bhansali answered
Leverage is basically the action that is performed by a lever. It refers to the mechanical advantage which is provided by the lever.

Leverage in another context also refers to an individual's advantage due to his position. It refers to the power to act in more effective means. For example, "she began her political career with a lot more social leverage than her competitor".

In financial terms, leverage refers to the utilisation of credit or the borrowed amount to enhance one's capability for speculation and raise the arte of return from a particular investment, such as purchasing security on a margin. In simpler words, it is the usage of loaned funds to increase one's purchasing power and in turn, to raise the investment's profitability factor.

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