The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

What Is Leverage In Relation To Securities ?

The term Leverage in relation to securities is the principle of increasing return without increasing investment. Buying stock on margin is an example of leverage. In finance, it means the relationship of a firm's debt to its equity, as expressed in the Debt to Equity Ratio. If the company earns a return on the borrowed money greater than the cost of the debt it is successfully applying the principle of leverage.

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