Leverage Build Up

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.

BREAKING DOWN '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. Debt/Equity Ratio

    Debt/Equity Ratio is debt ratio used to measure a company's financial ...
  2. Homemade Leverage

    A substitution of risks that investors may undergo in order to ...
  3. Double Leverage

    When a bank holding company conducts a debt offering to acquire ...
  4. Leveraged Buyout - LBO

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

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

    A bank loan to a highly leveraged company. HLTs can be thought ...
Related Articles
  1. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  2. Trading Strategies

    Day Trading Strategies For Beginners

    From picking the right type of stock to setting stop-losses, learn how to trade wisely.
  3. Options & Futures

    Bond Spreads: A Leading Indicator For Forex

    Here we examine some telling patterns in the relation between countries' interest rates and their currency pairs.
  4. Investing

    Finding Profit In Troubled Stocks

    Find out the difference between a company capable of surviving a share-price beating and one that cannot.
  5. Investing

    Spotting Cash Cows

    We show you why some of these companies stand apart from the herd.
  6. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  7. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  8. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  9. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  10. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. Can mutual funds use leverage?

    Traditionally, mutual funds have not been considered leveraged financial products. However, a number of new products have ... Read Full Answer >>
  4. How do hedge funds use leverage?

    Hedge funds use several forms of leverage to chase large returns. They purchase securities on margin, meaning they leverage ... Read Full Answer >>
  5. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  6. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center