Leverage

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rajesh kumar tak

rajesh kumar tak (Querist)
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14 May 2012 tell me what is leverage nd where we use it

Guest

Guest (Expert)

14 May 2012 It refers to any technique to multiply gains and losses. It can be attained by buying Fixed Assets (operating leverage) and borrowing money (financial leverage).

Corporates can leverage their equity by borrowing money, it leads to less capital base and so do the sharing of Profit & Loss.

If we buy fixed asset, wch raises the proportion of fixed cost i.e a change in revenue leads to higher change in operating income

Guest

Guest (Expert)

14 May 2012 Also leverage technique is used in derivatives where we can get exposure to say Rs 1 crore by keeping Rs 10 lakhs in margin. Here assets are leveraged

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