Leverage
Leverage is a term used to describe the use of borrowed funds to increase the potential return of an investment. It involves using borrowed capital or debt to finance an investment with the expectation that the profits made will be greater than the interest payable on the borrowed funds.
For example, a company may leverage its operations by taking on debt to finance expansion projects. By doing so, the company can potentially increase its revenue and profits, which can result in higher returns for its shareholders.
Another example of leverage is in the stock market, where investors can use margin trading to amplify their returns. By borrowing money to buy more shares than they could with their own capital, investors can potentially increase their profits if the stock price rises. However, leverage also increases the risk of losses if the stock price falls.
Overall, leverage can be a powerful tool for increasing returns, but it also comes with increased risk. It is important for investors to carefully consider the risks and rewards of using leverage before making any investment decisions.
For more information on leverage, you can visit Wikipedia.