What does leverage mean?

to use (a quality or advantage) to obtain a desired effect or result: She was able to leverage her travel experience and her gift for languages to get a job as a translator. to provide with leverage: The board of directors plans to leverage two failing branches of the company with an influx of cash.

Should you use leverage in your personal life?

Before using leverage in your personal life, be sure to weigh the pros and cons. Going into debt can have serious consequences if you can’t afford to repay what you borrow, like damaging your credit or leading to foreclosure. 3. Leverage in Investing

What happens if consumer leverage is too high?

Households with a higher calculated consumer leverage have high degrees of debt relative to what they make and are therefore highly leveraged. Consumers may eventually find difficulty in securing loans if their consumer leverage gets too high. For example, lenders often set debt-to-income limitations when households apply for mortgage loans.

What is a common leverage ratio?

Several common leverage ratios are listed below. A company can analyze its leverage by seeing what percent of its assets have been purchased using debt. A company can subtract the total debt-to-total-assets ratio by 1 to find the equity-to-assets ratio. If the debt-to-assets ratio is high, a company has relied on leverage to finance its assets.