Leverage Definition

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Leverage Definition

Leverage has many different meanings. It can be used as a noun or a verb. In this article, we will discuss its different meanings and how we can use it correctly.

Leverage is an uncountable noun commonly used to refer to the ability to influence situations or people so that you can control what happens. In finance, it refers to the ratio of company’s loan capital to the value of its common stock. Apart from this, it hasa literal meaning and it is the exertion of force by means of a lever.

The following are examples of how we can use leverage as a noun.

  • His determination is his leverage to get his goals achieved.
  • Our company needs to determine our leverage ratios.
  • The ballgot stuck in a hard metal that wouldn’t respond to leverage.

As mentioned, leverage can also be used as a verb. To leverage something means to use borrowed money to buy or pay something that may generate income in the future. Have a look at the sentences below:

  • I just got my personal loan approved and I’m going to leverage that money for expanding my online business.
  • We can leverage the money we got from our salary loan.

Dialog:

Tony: Hi Ray. It’s been a while since we met. How have you been?

Ray: I’ve been OK, but my business is not doing well.

Tony: That’s too bad. What happened? You told me before you were trying to leverage the money you got from your farm to build a restaurant in the city.

Ray: Yeah. Well, my restaurant is not earning enough money to pay for my bank loan, and I am going to lose my farm.

Tony: No way! You can’t lose your farm. How about you sell your restaurant and keep your farm? Farming is going to be a big business, and you are a great farmer. Many people want organic foods. Maybe you can capitalize on that.

Ray: It sounds like a good idea. I will talk to my wife about this. She is the one managing our finances and she has the upper hand.

Tony: Sure. Let me know what happens. 

Other words you can create from leverage:

Leveraging: the present participle form of leverage and it is used for continuous tenses.

Leveraged: this is the past participle of leverage and it is used for perfect tenses.

Levering: the original term for leveraging.

Lever: this can be a noun or a verb. If it is a noun it refers to a rigid bar that is used to help move a heavy or firmly fixed load.

Collocations:

Accounting leverage

Notional Leverage

Economic Leverage

Operating Leverage

Financial Leverage

Leverage Ratio

Related phrasal verbs:

Cash in: to use an opportunity to make a profit or gain an advantage.

  • She is trying to cash in her talent. 

Capitalize on something: to use something, especially an event or a situation, to help you to achieve something or get an advantage.

  • We can capitalize on the higher exchange rate.

Cash in on something: to get money or an advantage from an event or situation, sometimes in an unfair way.

  • They are trying to cash in on the controversy. 

Play on or upon: to use a situation or emotion to get what you want.

  • I know that Jim has been playing on our CEO’s emotion to get a promotion. 

Related idioms: 

Upper hand/whip hand: when we say someone has the upper hand/whip hand, it means that they have more power than anyone else and they have control.

  • We should make the deal now that we have got the upper hand and can demand higher prices for our products.

Bargaining chip: something that a negotiator can offer to reach an agreement.

  • He used lifetime warranty as his bargaining chips to sell his products. 

Vantage-ground: it refers to someone’s superiority or advantage of position or place over someone else, especially an opponent.

  • Because of the vantage-ground of his position as the company’s CEO and as one of the most popular philanthropists, he closed the multi-million deals with the government. 

Competitive advantage: refers to an advantage that a company or country has which can be a source of their current and future competitive success relative to other companies or countries.

  • We believe that innovation is our competitive advantage. 

Multiplier Effectmeans the ability banks have to influence the economy by lending money to businesses. Itis usually related to government or banks increasing the available money to businesses, consumers and people in an effort to stimulate the economy. 

  • I believe the multiplier effect will be most beneficial way of stimulating the economy.

Synonyms (other ways to say):

Influence

Authority

Force

Hold

Pull

Ascendancy

Clout

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