MAKE MONEY FROM LEVERAGE

What is Leverage?
Leverage is

1. The use of various financial instruments or
borrowed capital, such as margin, to increase the potential return of an investment.



Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged. This is why we need training. Leverage magnifies both gains and loses in the business world, a company can use leverage to try to generate shareholders wealth, but if it fails to do so, the interest expense and the credit risk of default destroys shareholders value.


2. The Amount of debt need to finance a firm's Assets.

Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. 


For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate.

If the company uses debt financing by borrowing  $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders. 

A firm with significantly more debt than equity is considered to be highly leveraged.





Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home.

For training on how to make money in trade using leverage, email ladail@hotmail.com