Investment Analysis
Financial Leverage
Definition
What is Financial Leverage?
The use of debt or other fixed claims to amplify returns and losses to equity holders.
Example in practice
How This Looks in Practice
Borrowing raises ROE in good periods but increases bankruptcyA legal process for an entity unable to meet its financial obligations. risk.
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Related Terms
Investment Analysis
Fundamental Analysis
The evaluation of economic, industry, company, and financial information to estimate an investment's value.
Investment AnalysisQuantitative Analysis
The use of mathematical models, statistics, and structured data to evaluate investments.
Investment AnalysisQuality of Earnings
The degree to which reported profit reflects sustainable operations and is supported by cash flow.
Market AbuseWash Trade
A trade or series of trades creating the appearance of activity without a genuine change in beneficial ownership.