Leverage Build Up

AAA

DEFINITION of 'Leverage Build Up'

The accumulation of additional debt to enter a position that has the potential for large returns. From the perspective of portfolio management, leverage build up involves partaking in excessive leveraged positions for the opportunity to magnify returns. Leverage build up also occurs in corporate takeovers where a highly leveraged company purchases another leveraged company. Thus, the total debt of the parent increases.

INVESTOPEDIA EXPLAINS 'Leverage Build Up'

Leverage build up, whether referring to portfolio management or corporate finance, increases the risk exposure of the investment. If the position does not come to fruition, the debt must still be repaid in a timely manner in order to avoid bankruptcy.

RELATED TERMS
  1. Homemade Leverage

    A substitution of risks that investors may undergo in order to ...
  2. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  3. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
  4. Modigliani-Miller Theorem - M&M

    A financial theory stating that the market value of a firm is ...
  5. Highly Leveraged Transaction - ...

    A bank loan to a highly leveraged company. HLTs can be thought ...
  6. Double Leverage

    When a bank holding company conducts a debt offering to acquire ...
Related Articles
  1. Evaluating Bond Funds: Keeping It Simple
    Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

  2. Day Trading Strategies For Beginners
    Trading Strategies

    Day Trading Strategies For Beginners

  3. Bond Spreads: A Leading Indicator For ...
    Options & Futures

    Bond Spreads: A Leading Indicator For ...

  4. Spotting Cash Cows
    Investing

    Spotting Cash Cows

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center