Legal Definition and Related Resources of Leverage

In commercial language, the term is used to denote the amount of money borrowed by a party in business in excess of money or assets invested in the business. See community Bank v Jones, 566 P.2d 470, 278 Or. 647.

The use of debt financing.

The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 1,000,000 common shares increases from $1,000,000 to $1,500,000, earnings per share would go up from $1 to $1.50, or an increase of 50%. But if earnings of a company that had to pay $500,000 in bond interest increased that much, earnings per common share would jump from $.50 to $1 a share, or 100%.

Browse or run a search for Leverage in the American Encyclopedia of Law, the Asian Encyclopedia of Law, the European Encyclopedia of Law, the UK Encyclopedia of Law or the Latin American and Spanish Encyclopedia of Law.

Leverage in Historical Law

You might be interested in the historical meaning of this term. Browse or search for Leverage in Historical Law in the Encyclopedia of Law.

Search for legal acronyms and/or abbreviations containing Leverage in the Legal Abbreviations and Acronyms Dictionary.

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Resources

See Also

Further Reading

Auerbach, Alan J. 1992. Leverage. In The New Palgrave Dictionary of Money and Finance, eds. Peter Newman, Murray Milgate, and John Eatwell, pp. 574-577. London: Macmillan.

Barclay, Michael J., Leslie M. Marx, and Clifford W. Smith Jr. 2003. The Joint Determination of Leverage and Maturity. Journal of Corporate Finance 9 (2): 149-167.

Myers, Stewart C. 1977. Determinants of Corporate Borrowing. Journal of Financial Economics 5 (2): 147-175.

Jan Toporowski

Leverage Definition (in the Accounting Vocabulary)

The New York State Society of Certified Public Accountants offers the following definition of Leverage in a way that is easy for anybody to understand: The use of borrowed funds to increase the profit from an investment.

Financial Leverage Definition (in the Accounting Vocabulary)

The New York State Society of Certified Public Accountants offers the following definition of Financial Leverage in a way that is easy for anybody to understand: The ability to increase earnings for stockholders by earning more on ASSETS than is paid in INTEREST on DEBTincurred to finance the assets.