Leverage (also used in German; here the word is partly masculine, partly [as at Deutsche Bundesbank] neuter; sometimes translated into German as Hebel[effekt])

In a company, the dependence of the profitability of equity on the proportion of debt financing. – A positive leverage effect occurs when the overall profitability of the capital is higher than the interest on the borrowed capital. Leverage normally increases the return on equity as debt increases, which carries a number of risks. – See deleveraging, profit, profit taxation, equity, deposits, debt, leverage (effect), leverage ratio, capital, prudential filter. – Cf. Deutsche Bundesbank Monthly Report, January 2012, p. 13 et seq. (basic information on the capital structure of companies; references).

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