Leverage (finance)
Etymology
From lever, through Old French levier, from Latin levare, "to raise, lift" (from levis, "light"). Just as a physical lever multiplies a small force into a large one, financial leverage multiplies a small amount of your own money into a large position. The financial sense took hold in the twentieth century.
noun · /LEV-er-ij/
Using borrowed money to increase the potential return on an investment — and, with it, the potential loss.
What it names
It explains how a small down payment can control a large asset, and why the same debt that magnifies gains can wipe you out when prices turn.
Example
By buying the building with heavy leverage, they doubled their return — then nearly lost everything when rents dropped.
Related idea
The debt in leverage usually rests on collateral — the asset a lender can seize if the bet goes wrong.
noun · /LEV-er-ij/
The power to influence a situation to your advantage; also the mechanical advantage gained by using a lever.
What it names
bargaining power in a negotiation; the force a crowbar multiplies
Example
With a signed contract in hand, she finally had some leverage.
Related idea
Ties directly to fulcrum — a small push at the right point moves a great weight.
verb · /LEV-er-ij/
To use something to maximum advantage.
What it names
putting an existing asset, skill, or relationship to work
Example
The startup leveraged its user data to launch a second product.
Related idea
Distinct from the financial sense of piling on borrowed money.