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Topic: Leverage (finance)

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In the News (Fri 20 Apr 18)

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  Leverage (finance) - Wikipedia, the free encyclopedia
Leverage is using given resources in such a way that the potential positive or negative outcome is magnified.
Financial leverage takes the form of borrowing money and reinvesting it with the hope to earn a greater rate of return than the cost of interest.
A firm's debt to equity ratio is therefore an indication of its leverage.
en.wikipedia.org /wiki/Leverage_(business)   (515 words)

 Section 2 - Performance Review - FHWA Innovative Finance   (Site not responding. Last check: 2007-10-11)
Leverage as a measure of non-Federal co-investment is relatively easy to convert into a ratio, as the calculations rely simply on an accurate breakdown of capital funds by Federal and non-Federal sources.
Leverage for the SIB program is thus calculated as the total current capitalization of the SIBs (Federal and state contributions combined) plus any loan repayments to date (repre-senting recycled funds), divided by the amount of Federal outlays employed thus far to capitalize the nation's SIBs.
Partly for this reason, the leveraging ratio has been used in the past to discuss and evaluate this pro-gram, and while its value may be limited, it is useful to examine the data across time, and determine if there are changes or trends of note.
www.fhwa.dot.gov /innovativefinance/perfreview/sect2.htm   (4639 words)

 Design-Build Institute of America, DBIA   (Site not responding. Last check: 2007-10-11)
A leverage lease is usually long-term, frequently 15 to 20 years in length plus options to renew the lease for most of the building's economic life.
This financing is particularly attractive for small to medium size construction projects or for agencies that may not have experience in the municipal bond market.
Furthermore, projects that are destined to be funded with bond proceeds or from state or federal grants or loans may be constructed utilizing this direct financing as an interim financing mechanism, since statutory considerations may preclude the issuance of bonds or receiving state or federal grants or loans prior to project completion.
www.dbia.org /secure/dateline/69_spec.html   (1272 words)

 Read about Leverage (finance) at WorldVillage Encyclopedia. Research Leverage (finance) and learn about Leverage ...   (Site not responding. Last check: 2007-10-11)
In a rising market, the compounding associated with a leveraged portfolio leads to greater gains; in a declining market, the compounding of a leveraged portfolio may lead to larger losses.
Because the percentage increase in a leveraged portfolio is higher by the same ratio as the decrease is higher.
In a 200% leveraged index it's a 20% increase, to 120, and a 18.17% (9.09*2) decrease to 98.2.
encyclopedia.worldvillage.com /s/b/Leverage_%28business%29   (607 words)

 Giddy: What Is Leveraged Finance?
Leveraged finance is funding a company or business unit with more debt than would be considered normal for that company or industry.
Leveraged Acquisition Finance is the provision of bank loans and the issue of high yield bonds to fund acquisitions of companies or parts of companies by an existing internal management team (a management buy-out), an external management team (a management buy-in) or a third party (an acquisition).
Leveraged asset-based finance entails raising debt capital for companies where the physical assets or a defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects.
giddy.org /dbs/structured/LevFinarticle.htm   (851 words)

 Financial Management (Financial Management Association): Leverage Ratios, Industry Norms, and Stock Price Reaction: An ...
Despite the support by leverage ratio research for the importance of an industry DE benchmark, one can argue that an industry benchmark DE may not always be a good estimate of what is perceived as its wealth-maximizing DE.
Nonetheless, the optimal dynamic financing policy is still characterized by a tradeoff between the corporate tax shield advantage of debt and the leverage-related costs of debt.
In general, the earlier leverage ratio research views a target DE as implying some sort of wealth-maximizing DE that is consistent with the existence of an optimal DE.
www.findarticles.com /p/articles/mi_m4130/is_2_28/ai_56750609   (1478 words)

 Section 3 - Performance Review - FHWA Innovative Finance   (Site not responding. Last check: 2007-10-11)
Federal transportation innovative finance tools were developed both to increase the aggregate level of investment in surface transportation projects and to accelerate the con-struction of projects that employ these financing techniques.
When considering the leverage ratio attributable to Federal credit instruments, it is also possible to compare the budgetary cost of the credit instruments themselves (i.e., the cumulative subsidy cost for all loans, lines of credit, and loan guarantees awarded to date) to the total cost of the projects they support.
Innovative finance can also expand the level of investment in transportation projects by lowering barriers to debt financing in cases where the principal revenue pledged to repay the borrowed funds derives from new user-based charges and/or is generated from the project itself.
www.fhwa.dot.gov /innovativeFinance/perfreview/sect3.htm   (5755 words)

 Business Economics: Leverage risk in the nonfinancial corporate sector
Instead, the debt buildup was largely related to financing of corporate restructurings that resulted in massive net equity retirements totalling $371.5 billion.(1) Debt financing has been more heavily relied upon in the 1980s than in any other postwar period, but it is the debt-for-equity explosion that makes the 1980s unique and financial risk higher.
Adjusting corporate financing trends properly for inflation better illustrates the degree to which firms have levered up in the 1980s and demonstrates that the recent debt buildup has not been dominated by cyclical or long-term trends.
Moreover, although leverage was not appreciably higher at year-end 1987 than in the past ten years, at 71.4 percent it remained nearly half again as high as the 1950-75 average of 51 percent.
www.findarticles.com /p/articles/mi_m1094/is_n3_v24/ai_7730121   (1326 words)

 Fool.com: Leverage [Return on Equity]
The problem with adding leverage to a company's equity as a way to boost ROE is that after a certain point, the actual cost of the debt diminishes profit margins and decreases asset turns.
In fact, many perceive earnings generated from debt financing as higher risk than earnings generated from equity financing, particularly if the business is tied to the business cycle in any way, shape or form.
Whereas a company that is completely equity financed can normally ride out a downturn, a company with a large proportion of debt financing is unfortunately not quite so well equipped.
www.fool.com /School/ReturnOnEquity/ReturnOnEquity04.htm   (1218 words)

 Calyon, leadership in acquisition finance   (Site not responding. Last check: 2007-10-11)
In financing the acquisition, an attempt is made to maximise the amount of borrowings relative to the equity invested in the deal, and the debt is frequently structured into several layers, each having its specific repayment terms and including a so-called mezzanine component that is intermediary between equity and borrowings.
Senior-level financing was relatively stable but mezzanine loans grew sharply with a total of EUR 5.06 billion in 62 transactions.
The Leverage and Financial Sponsors Group, which has coverage responsibility for investment funds, works closely with all our business lines to promote the full range of Calyon's products (ECM, Capital Market, M&A, etc.) and to provide sophisticated financing solutions in order to be able to respond to all types of LBOs.
www.calyon.com /news-zooms/leadership-acquisition-finance.html   (1546 words)

 Leverage   (Site not responding. Last check: 2007-10-11)
Leverage helps both the investor and the firm to invest or operate.
If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses.
Leverage can be created through options, futures, margin and other financial instruments.
www.investopedia.com /terms/l/leverage.asp   (390 words)

And analysts are focusing on the effective leverage for both on- and off-balance sheet financing.
The industry's capital structure continues to have a high degree of financial leverage in the deregulated environment, helping to fund new growth and new generation: Higher debt facilitates the increase in leverage.
The debt-to-equity ratio increased to 1.32 as of December 31, 2000, for the third time in the last four years, and 28.2 percent higher than the level as of December 31, 1996, a key turning point for the industry in terms of restructuring and regulation.
www.eei.org /magazine/editorial_content/nonav_stories/2002-05-01-finance.htm   (1213 words)

 Leveraged Finance   (Site not responding. Last check: 2007-10-11)
What the financing is for will also determine how the banks structure their teams.
For some, the purest form of leveraged finance is management buyouts and leveraged buyouts; others include any acquisition finance, recapitalisations, IPOs and disposals and equity co-investment.
Eight or nine banks are aggressively building leveraged finance teams in Europe, competing for the same staff, while others are trying to maintain or improve their positions.
www.riskpublications.com /credit/july00/features/credleveraged.htm   (577 words)

 Foundations of Financial Management | e-Learning Session
Combined leverage is the extent to which both ____ and ____ is used in a business(Critical Concept).
The degree of operating leverage (DOL) of a firm is defined as the percentage change in ____ that occurs as a result of a percentage change in sales(Key Term).
The degree of combined leverage allows is to calculate the effect of using both operating and financial leverage to magnify the returns for the firm.
highered.mcgraw-hill.com /sites/0072422645/student_view0/chapter5/e-learning_session.html   (688 words)

 Financial Executives Online   (Site not responding. Last check: 2007-10-11)
Leverage competencies are core leadership qualities, such as strategic thinking, innovation and managing risk.
Traditional finance skills are still the bedrock for being an effective financial executive.
Greg Polcer, vice president of finance at Unilever-HPC, says plainly, "Until you do that, you don't have the right to do anything else." At the same time, Unilever also considers the financial executive's role to be that of a "consigliere," an internal consultant/confidant who partners with the most senior people in the organization.
www.fei.org /magazine/articles/11-12-2000_Research.cfm   (657 words)

 TheStreet.com: The Motley Fulcrum: How Leverage Plays Out in Your Portfolio
Leverage is any situation in which some measure of input has an enlarged effect on output.
This magnitude of leverage can translate into a reduction of a bank's stock price of 5% to 7% for every 1% of decline in net interest margin.
We underweight bank stocks in an environment of rising short-term rates (as we have seen over the last year), which compresses margins, and go back into that sector when short-term rates are stabilizing (as we see now) or falling (as we may see a year from now).
www.thestreet.com /funds/managerstoolbox/999939.html   (996 words)

 Principles of Finance   (Site not responding. Last check: 2007-10-11)
Leverage is a magnification of earnings that results from having fixed costs in the company.
Operating leverage is equal to the percentage change in operating income divided by the percentage change in sales.
Financial leverage is equal to the percentage change in net income divided by the percentage change in operating income.
campus.murraystate.edu /academic/faculty/larry.guin/FIN330/Eightprn.htm   (431 words)

 Commercial Finance Group - Leverage Buyout   (Site not responding. Last check: 2007-10-11)
A leveraged buyout is the purchase of a company using borrowed funds for a substantial portion (usually 70% or more) of the purchase price.
The purchasers are often managers, in which case the transaction is commonly referred to as a "management leveraged buyout" or "management buyout." In all types of LBO's the assets of the purchased company are used as collateral, and the cash flow of the company is used to pay off the debt.
Management leveraged buyout borrowings are typically made directly by the company.
www.fcscfg.com /Terminology/L-terms/leverage.html   (301 words)

 Power Bases - CFO.com
Ironically, the economic downturn seems to have decreased the leverage finance chiefs possess — at a time when they most need to be able to hold their ground against unreasonable requests.
At companies where CEOs push for aggressive bookkeeping, a scrupulous finance chief might be torn between producing the desired numbers or delivering a true picture of the company's situation.
For instance, he says, he knows of a finance chief at a major insurance company who was able to sharply disagree with the CEO on a matter before the board.
www.cfo.com /printable/article.cfm/3004592?f=options   (791 words)

 TheManageMentor - Finance - Understanding leverage
The extent to which a business uses fixed costs (compared to variable costs) in its operations is referred to as "operating leverage." When operating leverage is used extensively, there will either be an increase in profits or losses, depending on the volume of sales.
With a lower level of operating leverage, the business shows poor growth in profits as sales rise, but faces less risk of loss as sales decline.
Financial leverage is the name given to the impact on returns of a change in the extent to which the firm’s assets are financed with borrowed money.
www.themanagementor.com /enlightenmentorareas/finance/CFA/leverage.htm   (462 words)

 Warren Publications   (Site not responding. Last check: 2007-10-11)
This, in turn, has increased the popularity of high-leverage mezzanine and bridge financing, which in many cases allows the buyer to finance up to 90 percent of acquisition plus rehabilitation costs.
Importantly, the Department of Housing and Urban Development permits the value of the land (as opposed to the ground cost) to be included in the cost basis for the determination of the maximum allowable mortgage.
When considering high-leverage financing options for new construction or substantial rehabilitation, the 221(d)(4) program is one that is difficult to beat.
www.thewarrengroup.com /wp/bsao/bsao1q2005/110328200500004.asp   (836 words)

 Christian Financial Hellp | Financial Planning Advice | Business Financing Leverage Need | Changemymailingaddress ...   (Site not responding. Last check: 2007-10-11)
Being a part of the growth of electronic commerce business finance school on-line merchants will increase their market share and profits The chief advantage of web based property investment finance retailers have over real world christian financial hellp establishments is the reduced operating costs.
When we first built this website we knew that we needed to be quick in providing you the better places on the net for financial planning in singapore, we believe we have achieved that.
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 Gulf Times Newspaper - Qatar, Gulf and World News - Finance & Business
One front in the competition is the level of leverage finance banks are offering, despite falling hedge fund returns this year.
Such leverage, which multiplies a hedge fund’s financial firepower by a factor of 10, compares with a level of three or four times last year, he added.
One broker confirmed on Friday that such leverage was available on diversified pools of assets, if hedging had been used to enhance the credit quality or significantly reduce market risk.
www.gulf-times.com /site/topics/article.asp?cu_no=2&item_no=52270&version=1&template_id=48&parent_id=28   (896 words)

 Leverage Finance
It has a team of four dedicated personnel centred in the Leveraged Finance Unit in London and can call on local resources in the Continental European offices in Brussels, Düsseldorf and Paris.
The Leveraged Finance Unit was established in 1997 to oversee and expand the Bank's role in the leveraged finance market.
Another important role for the Leveraged Finance Unit is to manage the Bank's portfolio of European Private Equity Fund investments.
www.smbcgroup.com /apps/internet.nsf/urlindex/LBOMBO   (294 words)

 SSRN-Revealed Preferences for Corporate Leverage by Thomas Philippon
I show that the most commonly used empirical models of capital structure (the partial adjustment model, and the financial deficit model) are mis-specified.
Estimating a correctly specified model yields new insights and solves spurious puzzles: The expected future financial deficit is a significant determinant of the current choice of debt versus equity, and profitable firms have a higher target leverage.
As an application, I show that CEO tenure flattens the left part of the estimated value function, which is consistent with agency theories.
papers.ssrn.com /sol3/papers.cfm?abstract_id=503863   (277 words)

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