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

Keep scrolling for more

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
See More
Recent Examples on the Web: Noun Why is this the case and what can help the organisations leverage RE resources to access reliable, sustainable and affordable sources of power? Pamli Deka, Quartz India, "What is preventing the adoption of renewable energy in rural India, and how to fix it?," 13 Feb. 2020 As far as negotiation leverage goes, Sprint’s in a tough spot, said Walt Piecyk, an analyst with LightShed Partners. David Mclaughlin, Time, "T-Mobile's $26.5 Billion Sprint Merger Approved Despite Competition Concerns," 11 Feb. 2020 The 26-year-old center, who has a player option for the 2020-21 season, certainly gives the Cavs some leverage in summer negotiations with Thompson. Chris Fedor, cleveland, "Tristan Thompson stays with Cleveland Cavaliers through NBA trade deadline; no plans for buyout," 6 Feb. 2020 The Syrian fighters are therefore a convenient way for Erdoğan to avoid these risks, while still exerting leverage over Libya’s future. Frederic Wehrey, The New York Review of Books, "Among the Syrian Militiamen of Turkey’s Intervention in Libya," 23 Jan. 2020 So the Russian rage is part of an effort to restore, to make Russia great again, to make Russia powerful again, to make Russia listened to again and to give Russia significant geopolitical control and resources and leverage again. Eric Johnson, Vox, "The wrong US response to Russia and China may trigger a “new Cold War,” warns Stanford University’s Larry Diamond," 7 Aug. 2019 How can designers best leverage the Americans with Disabilities Act to make these spaces equally useful to everyone? Clay Chandler, Fortune, "“Make room to break the rules,” and other creative business lessons from Paul Smith," 4 Feb. 2020 Since states currently must pay for all medically necessary drugs, the waiver would give them more leverage to negotiate discounts with drug makers. The Editorial Board, WSJ, "Trump’s Medicaid Benefit," 3 Feb. 2020 That coaching change, in itself, adds leverage to Prescott’s case. Tim Cowlishaw, Dallas News, "Dak Prescott is selling himself now, and that’s a problem for the Dallas Cowboys," 3 Feb. 2020 Recent Examples on the Web: Verb But MoLI—which opened in September—yields different insights and fresh takes, in part because its curators can leverage 10 million artifacts from the National Library's collection. Elizabeth Wellington, Condé Nast Traveler, "Dublin's New Literary Museum Reframes the Power of Irish Literature," 13 Feb. 2020 Once the academy raised enough capital, the founders leveraged those assets to fund a more inclusive model in 2003 in the form of the Surf Bus Foundation nonprofit. Jessica Mordo, Sunset Magazine, "Where the Wild Things Are: Programs That Foster Kids’ Connection to the Outdoors," 11 Feb. 2020 Rodrigo Medellín—an ecologist, conservationist, and National Geographic Explorer-at-Large—has been working for decades to save the lesser long-nosed bat by leveraging its tequila connections. National Geographic, "Lesser long-nosed bat," 8 Feb. 2020 Some of that money could be leveraged for bonds to pay for conservation easements to prevent development over sensitive areas that feed into the aquifer. Joshua Fechter, ExpressNews.com, "San Antonio officials: City could keep aquifer protection program while shifting sales tax to public transit," 29 Jan. 2020 The Miami Democrat successfully leveraged relationships to secure a spot — over more experienced colleagues — on a committee that addressed her biggest campaign promises. Alex Daugherty, miamiherald, "A Miami Democrat who wants to talk healthcare grapples with impeaching Donald Trump," 4 June 2019 By leveraging strong storytelling and images that clearly came from a family album, the ad forged a stronger connection with consumers who already know what Google does. Derek D. Rucker For Cnn Business Perspectives, CNN, "Why Google's 'Loretta' ad won the Super Bowl," 3 Feb. 2020 The House impeached Trump last year, alleging the president abused his power by leveraging the military aid to try and benefit himself politically. Zac Anderson, USA TODAY, "'I believe John Bolton': Former Trump chief of staff John Kelly backs Bolton in Ukraine dispute," 30 Jan. 2020 Remove deep imprints from muddy shoes and paws in Max Clean mode, which leverages two rows of rotating brushes. Popular Science, "Easy-to-use carpet cleaners that pull up dirt and stains," 23 Jan. 2020

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.

See More

First Known Use of leverage

Noun

1830, in the meaning defined at sense 1

Verb

1957, in the meaning defined at sense 1

Keep scrolling for more

Learn More about leverage

Time Traveler for leverage

Time Traveler

The first known use of leverage was in 1830

See more words from the same year

Statistics for leverage

Last Updated

21 Feb 2020

Cite this Entry

“Leverage.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/leverage. Accessed 27 Feb. 2020.

Keep scrolling for more

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
How to pronounce leverage (audio)

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
leveraged; leveraging

Legal Definition of leverage (Entry 2 of 2)

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

Keep scrolling for more

Comments on leverage

What made you want to look up leverage? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

See Definitions and Examples »

Get Word of the Day daily email!

Test Your Vocabulary

More Confusing Words—Quiz

  • cats on impossible timber
  • The magician ______ moved the selected card to the top of the deck.
Spell It

Can you spell these 10 commonly misspelled words?

TAKE THE QUIZ
Add Diction

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ
Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!