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Finance & Banking vocabulary · Corporate Finance

Leverage

Meaning in finance & banking, with examples

/ˈlevərɪdʒ/nounCommon term

In finance & banking, leverage means: Using borrowed money to finance assets or investments, or the level of a company's debt compared with its equity or earnings.

In Turkish: kaldıraç, borçluluk düzeyi

How it is used

Used in credit analysis, corporate finance and bank regulation. A company with a lot of debt is highly leveraged. Analysts measure leverage with ratios such as debt to EBITDA, and banks also report a leverage ratio.

Example sentences

  1. The company's leverage is too high: its debt is six times its EBITDA.

  2. Banks must keep their leverage below regulatory limits.

Common collocations

  • high leverage
  • leverage ratio
  • highly leveraged
  • reduce leverage
  • equityThe owners' share of a company: what is left when liabilities are taken away from assets. It includes paid-in capital and retained profits.
  • EBITDAShort for earnings before interest, taxes, depreciation and amortization: a measure of a company's operating profit before financing costs and non-cash expenses.
  • capitalMoney and other financial resources used to start and run a business; for banks, the owners' funds that absorb losses and protect depositors.
  • bondA debt security that a government or company sells to investors to borrow money. It pays regular interest, called a coupon, and returns the full amount at maturity.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Corporate Finance

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This page explains English vocabulary for learners. It is not financial advice.