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Definition: The use of various instruments to increase one's rate of return. In regards to business, leverage refers to using heavy financing for various activities.
StockJargon Advice: Most people think of options and futures as a way to leverage your money. The idea is that you essentially borrow money to increase your investing power. In futures, a person can buy $30,000 worth of corn for only $3,000 of their own money. If the corn goes up 10%, they will make $3,000 (a 100% return). This is one example.
Companies with a lot of debt are considered to be highly leveraged. You might remember that leverage was one of the reasons why Enron went under.
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