leverage

noun
le·​ver·​age | \ ˈle-və-rij How to pronounce leverage (audio) , ˈlē-; ˈlev-rij, ˈlēv-\

Definition of leverage

 (Entry 1 of 2)

1 : the action of a lever or the mechanical advantage gained by it
2 : power, effectiveness trying to gain more political leverage
3 : the use of credit to enhance one's speculative capacity

leverage

verb
leveraged; leveraging

Definition of leverage (Entry 2 of 2)

transitive verb

1 : to provide (something, such as a corporation) or supplement (something, such as money) with leverage also : to enhance as if by supplying with financial leverage
2 : to use for gain : exploit shamelessly leverage the system to their advantage— Alexander Wolff

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Examples of leverage in a Sentence

Noun

The union's size gave it leverage in the labor contract negotiations. The player's popularity has given him a great deal of leverage with the owners of the team. I used the leverage of the bar and a wooden block to pry the rock out of the hole.

Verb

The company wants to leverage its brands more effectively. a reality show contestant who's trying to leverage her 15 minutes of fame
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Recent Examples on the Web: Noun

That will give the new government leverage in its dealings with the United States that the departing Mr. Peña Nieto, who is deeply unpopular, does not have. Elisabeth Malkin, New York Times, "U.S. Delegation and Mexico’s Next President Aim to Reset Relations," 13 July 2018 Phoenix simply had no shot at creating leverage in the negotiation given that Booker is set to play for his fourth coach in four seasons and has yet to play for a 25-win team. Ben Golliver, SI.com, "Grades: For the Suns, Signing Devin Booker to a Max Deal Was No-Brainer," 8 July 2018 That switch also gives Univision less leverage in negotiations with pay-TV distributors like Dish. Meg James, latimes.com, "Univision channels go dark on Dish Network and Sling TV due to contract impasse," 30 June 2018 But control of the port would bring the coalition closer to its goal of regaining the entire coastal plain, landlocking the Houthis and giving it more leverage in peace talks. The Economist, "Yemen’s main port could become the next battleground," 7 June 2018 The proceeds from Monday’s deal could allow the company to fast-track its plans to reduce leverage and pay down more debt than previously anticipated, credit analysts said. Nina Trentmann, WSJ, "GE’s Asset Sales Bode Well for Balance Sheet," 26 Feb. 2019 Unlike with other portable shovels, this handle fully extends, which makes it easier on your back and provides more leverage for heavy lifting. Timothy Dahl, Popular Mechanics, "Here's the Only Shovel You'll Ever Need," 1 Feb. 2019 That’s when a college player has leverage — the threat of returning to school for a senior season — if he is drafted. Jeff Seidel, Detroit Free Press, "Tigers outfield prospect Brock Deatherage a 'Kirk Gibson guy'," 13 July 2018 In probably 98 percent of NFL contract negotiations, the team has more leverage than the player. Andrew Brandt, SI.com, "How NFL and NBA Contracts Differ, and What NFL Players Can Do to Change It," 10 July 2018

Recent Examples on the Web: Verb

How the company leverages that technology for good is a constant theme for us. Nicole Phelps, Vogue, "Constant Innovation in a Culture of Inclusivity: A Conversation With Tapestry CEO Victor Luis," 30 Jan. 2019 Qualcomm also leveraged some of the Hexagon DSP from its Snapdragon smartphone chips and their aptX audio. Mark Hachman, PCWorld, "Qualcomm's Snapdragon 8cx for PCs aims to overcome the performance gap," 6 Dec. 2018 Every federal dollar should be leveraged by partnering with state and local governments, and, where appropriate, tapping into private sector investment — to permanently fix the infrastructure deficit. Callum Borchers, Washington Post, "Trump's simultaneously unifying and dividing State of the Union address, annotated," 30 Jan. 2018 Nonetheless, Spotify still faces tough challenges ahead, including but not limited to competition from international streaming players and from big tech's deep pockets that can afford to leverage music as a marketing loss leader. Cherie Hu, Billboard, "As Streaming Fuels Music Industry's Growth, More VC & Finance Veterans Move In," 4 Apr. 2018 Therefore, many manufacturers prefer to use both methods today, leveraging the strengths of each in hybrid manufacturing processes. Pam Baker, Ars Technica, "Artificial Intelligence and the coming of the self-designing machine," 6 Dec. 2018 Kolb explains that she and Haderlie are dedicated to leveraging Jackson’s botanical bounty to bring innovation to the natural beauty industry. Celia Ellenberg, Vogue, "Meet the Powerful Natural Skin-Care Line That’s Making “Wildcrafted in Wyoming” a Thing," 29 Nov. 2018 Despite the nearly decadelong buying spree, Vail’s balance sheet is conservatively leveraged, analysts say. Ezequiel Minaya, WSJ, "Vail Expansion Plan Goes Aggressive and Wipes Out," 11 Dec. 2018 Companies can leverage great personal stories to connect with customers, said Keith Hollingsworth, a professor at Morehouse College's business department. Candice Choi, chicagotribune.com, "Papa John is gone, but his image is still entwined with pizza chain," 12 July 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'leverage.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of leverage

Noun

1830, in the meaning defined at sense 1

Verb

1957, in the meaning defined at sense 1

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Statistics for leverage

Last Updated

21 Mar 2019

Look-up Popularity

Time Traveler for leverage

The first known use of leverage was in 1830

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More Definitions for leverage

leverage

noun

Financial Definition of leverage

What It Is

Leverage is any technique that amplifies investor profits or losses. It's most commonly used to describe the use of borrowed money to magnify profit potential (financial leverage), but it can also describe the use of fixed assets to achieve the same goal (operating leverage).

How It Works

Financial Leverage

Let's look at selected balance sheet and income statement information for Company XYZ.

Company XYZ has invented a new product that will revolutionize the widget market, but it needs to build a new $1,000,000 factory. It must choose between using equity or long-term debt to build the factory. We can see the impact on profits of both decisions.

Scenario A: Raise $1,000,000 by issuing new stock

XYZ is able to raise $1,000,000 by issuing 500,000 new shares at $2 per share. It builds its new factory and immediately sees revenues double and operating expenses increase by $300,000 (about 43%). Let's look at the impact on its financial statements:

Profit per share has almost tripled. That's pretty good.

Scenario B: Use financial leverage, raise $1,000,000 in debt

Let's see what happens if XYZ chooses to use $1,000,000 in debt to finance its new factory. Assume it can borrow at 5% per year.

By using leverage, Company XYZ increases the profit available to shareholders.

Operating Leverage
If we go back to Company XYZ, we can examine the effects of operating leverage on profits. Let's say the company is trying to choose between building their factory or outsourcing production to a third-party manufacturer. If they outsource production, they will pay $0.75 for each $1 widget they sell.

Scenario C: Outsource production instead of investing in additional fixed assets (the new factory)

As in the previous example, assume the company is able to double revenues when the new widget hits the market.

Comparing the results side-by-side, we can see the effects of leverage on profit potential:

Leverage it is not without risk. It requires a commitment to keep up with the principal and interest payments on the debt. If it's unable to do so, it will be forced into bankruptcy and shareholders will lose everything.

Why It Matters

Too much leverage can be bad, but there's no hard and fast rule as to how much is too much. No matter what its use, leverage can be a powerful tool when used responsibly. Savvy investors and companies use leverage to expand, hedge and speculate, but the overly aggressive can easily get in over their heads by losing money or going into bankruptcy.

For investors considering companies with debt, one of the most popular evaluations of a company's leverage is the debt-to-equity ratio (D/E). The interest coverage ratio, also known as times interest earned, is also a measure of how well a company can meet its interest-payment obligations. In general, these ratios suggest whether a company is "too safe" and is neglecting opportunities to magnify earnings through leverage or is overleveraged and at serious risk of default or bankruptcy.

Source: Investing Answers

leverage

noun

English Language Learners Definition of leverage

 (Entry 1 of 2)

: influence or power used to achieve a desired result
: the increase in force gained by using a lever

leverage

verb

English Language Learners Definition of leverage (Entry 2 of 2)

chiefly US : to use (something valuable) to achieve a desired result

leverage

noun
le·​ver·​age | \ ˈle-vrij, -və-rij How to pronounce leverage (audio) \

Legal Definition of leverage

 (Entry 1 of 2)

: the use of credit to enhance one's speculative capacity

leverage

transitive verb
leveraged; leveraging

Legal Definition of leverage (Entry 2 of 2)

: to provide (as a corporation) or supplement (as money) with leverage

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More from Merriam-Webster on leverage

Rhyming Dictionary: Words that rhyme with leverage

Thesaurus: All synonyms and antonyms for leverage

Spanish Central: Translation of leverage

Nglish: Translation of leverage for Spanish Speakers

Britannica English: Translation of leverage for Arabic Speakers

Comments on leverage

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