Financial Leverage: What it is, How it works and How to Calculate

Financial leverage means using borrowed money to amplify your investment returns — putting in 10 lakh of your own and borrowing 40 lakh more to control a 50 lakh asset. When the investment pays off, your returns multiply dramatically. But when things go wrong, your losses multiply just as fast. From home loans and margin trading to corporate bonds and credit cards, leverage is everywhere in modern finance. The 2008 global financial crisis and countless personal bankruptcies share one common thread: too much leverage, too little caution.