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Financial Leverage




Financial leverage relates a company's long-term debt and preferred stock to the company's common equity.  


Additional Comments:

Sometimes a stock is said to be highly leveraged.

What this simply means is that the company issuing the stock has a large proportion of bonds and preferred stock outstanding relative to the amount of common stock.

"High leverage" can work for or against a company depending on the earnings available to the common shareholders. Generally speaking, however, analysts consider highly leveraged companies to be risk-prone.

Related Terms:

Convertible Securities
Convertible securities can be exchanged or converted into common shares. Examples are convertible preferred stock, convertible ...

Stock
A share of a company's stock translates into ownership of part of the company. Thus, when ...

Common Stock Ratio
The percentage that common stockholders' equity reduced by intangible assets bears to total tangible capitalization (the ...





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