Leverage / Gearing

(1) The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders´ return on their investment and often there are tax advantages associated with borrowing. also called financial leverage. Leverage can be built up by direct borrowing (on-balance-sheet leverage, commonly measured by debt to-equity ratios) or by using off-balance-sheet transactions.
(2) The ratio of debt to equity.
(3) In options terminology, this expresses the disproportionately large change in the premium in terms of the relative price movement of the underlying instrument.
(4) An investment or operating position subject to a multiplied effect on profit or position value from a small change in sales quantity or price. Leverage can come from high fixed costs relative to revenues in an operating situation, or from debt or an option structure in a financial context