Leverage

buying with borrowed money: it multiplies both the profit and the disaster

In more detail

The ratio of other people's money to your own in a deal. To buy with twenty of your own and eighty borrowed is to work with leverage: both the profit and the loss on your money are multiplied several times over.

It was invented not for the risk but for the return: if the business you bought brings in more than the debt costs, the difference goes to whoever put in the smaller part.

Covered in the primer of chapter 6.

Where it appears in the course

In the academy “Leverage” is not a definition but an operation: you post it yourself and watch what it does to the balance sheet.

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