Leverage allows investors to control a larger position than their capital would otherwise permit. While it can magnify gains, it equally magnifies losses and can result in losing more than the original investment. Leverage is measured through metrics like debt-to-equity ratio for companies or margin levels for traders.
Key Takeaways
- Context matters when interpreting any financial metric.
- Combine multiple data points for informed decisions.
- Continue learning to build investment knowledge.
Quick Reference
Category
risk
Difficulty
Beginner
Reading Time
1 min
Related Terms
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Where You'll See This
This concept appears throughout stock detail pages and financial data.