leverage

Formsleverages, leveraging, leveraged

1. 1
   bargaining powernoununcountable

   Influence that is used, or multiplied, to gain an advantage, as in a negotiation or dispute.

   With the vote so close, the small party had enormous leverage over the government.

   He used the threat of a lawsuit as leverage to get the deal reopened.

   Similarclout, influence, sway, power, pull

2. 2
   lifting forcenoununcountable

   The multiplied force that a lever produces as it turns on a pivot.

   With enough leverage, a single worker could shift the stone using a long iron bar.

   Mechanics slip a pipe over the wrench handle to get extra leverage on a stuck bolt.

   Similarpurchase

   Note

   The figurative meanings all start from this mechanical one, which is simply lever with the suffix -age. A small push on the long arm of a lever moves a heavy load near the pivot, and engineers design with that gain, as in the variable leverage systems being introduced for railway brakes in 1960. Mechanical advantage is the technical name; leverage is the everyday one.

3. 3
   make full useverbslangUStransitive

   To use or exploit something, such as a resource, connection or piece of publicity, so as to take full advantage of it.

   The startup is leveraging its partnership with a major bank to win new clients.

   Smart teams leverage existing tools instead of building everything from scratch.

   Similarexploit, use, harness

   Note

   Business talk turned the noun into a verb, and it still carries a slangy, chiefly American edge, so careful writers often prefer use or build on. The result often follows with into (leverage the publicity into a distribution deal), and some speakers say leverage off something instead. It has spread well beyond offices, into press releases and academic prose about resources yet to be fully leveraged.

4. 4
   noununcountable

   The use of borrowed money, at a cost agreed by contract, to invest more than one could alone and earn a higher expected return, usually at high risk.

   The fund relied heavily on leverage, borrowing four dollars for every dollar its investors put in.

   When prices fell, traders using high leverage were forced to sell at a loss.

   Similargearing

   Note

   Debt works here like the lever's long arm: it magnifies results in both directions. If an investment funded partly with borrowed money rises, the gain on the investor's own stake is multiplied; if it falls, so is the loss, and the debt still has to be repaid. Traders state it as a multiple, so leverage of 125 times turns a $1,000 down payment into a $125,000 bet.

5. 5
   debt rationoununcountable

   The ratio of a company's debt to its equity.

   Analysts flagged the retailer's leverage, which had doubled after the buyout.

   Lower leverage gives a company more room to survive a bad year.

   Similargearing

   Note

   As a measure, leverage is something a company has a lot or a little of, not something it does. High leverage means the business runs largely on borrowed money, so borrowing to invest swings its results harder; gearing is another name for the same ratio. The New York Times was already writing of the factor known as leverage in 1933.

6. 6
   full capacitynoununcountable

   The capacity of a business to earn very high returns when its facilities operate at or near full capacity.

   Because most of its costs are fixed, the steel mill has enormous leverage when it runs near full capacity.

   Hotels with high leverage see profits jump sharply once occupancy passes a certain point.

   Note

   The fuller name is operating leverage, which keeps it apart from the borrowing kind. It comes from fixed costs: once a plant's machines and staff are paid for, each extra unit sold adds mostly profit, so returns climb steeply as the facility fills and fall as steeply when it empties. Investments that cut variable costs raise it.

7. 7
   statisticsnoununcountable

   In regression analysis, how far an observation's values for the independent variables lie from those of the other observations.

   An observation with high leverage can pull the regression line toward itself.

   The software flags any case whose leverage is well above the average.

   Note

   Statisticians use it for a point's potential pull on a regression, judged from its predictor values alone and not from its outcome. A point far from the others can therefore have high leverage and still sit right on the fitted line; it becomes dangerous when it is also an outlier, because then it can drag the whole fit. Formally, it is the observation's diagonal entry in the hat matrix.

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