How are you everyone?Today I will discuss with you about What is Financial Laverage? . I will try to highlight my experience. I am young and my experience is very little so please forgive me if there are any mistake

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What is Financial Leverage?:
Using borrowed capital as a funding source provides financial leverage when investing to expand the firm's asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money, specifically, the use of various financial instruments or borrowed capital to increase the potential return on an investment. Leverage can also refer to the amount of debt a firm uses to finance assets.
Understanding Financial Leverage:
Leverage is the use of debt or borrowed capital to undertake an investment or project. It is commonly used as a means of boosting an entity's equity base. The concept of leverage is used by both investors and companies:
Investors use leverage to significantly increase the returns that can be provided on an investment. They leverage their investments using various instruments including options, futures and margin accounts.
Companies can use leverage to finance their assets. In other words, instead of issuing stock to raise capital, companies can use debt financing to invest in business operations in an effort to increase shareholder value.
Investors who are not comfortable using direct leverage have several ways to access leverage indirectly. They can invest in companies that use leverage in the normal course of their business to finance or expand operations—without increasing their costs.

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How to calculate financial leverage
Leverage is a whole suite of financial ratios used to calculate how much debt a company is taking on in an effort to maximize profits. A few common leverage ratios are listed below.
Why is financial leverage important:
Financial leverage is important because it creates opportunities for investors. That opportunity comes with risk, and it's often recommended that new investors get a solid understanding of what leverage is and the potential downsides before entering a leveraged position. Financial leverage can be used strategically to position a portfolio to capitalize on winners and take greater losses when investments go bad.
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