Investopedia

Continue to Site »

Overleveraged

Filed Under » ,
Dictionary Says

Definition of 'Overleveraged'

Occurs when a business is carrying too much debt, and is unable to pay interest payments from loans. Overleveraged companies are unable to pay their expenses because of over excessive costs. This is the formula for financial leverage:

Financial Leverage = Operating Income / Net Income
Investopedia Says

Investopedia explains 'Overleveraged'

Occurs when a business has borrowed too much debt, and is unable to pay interest payments on the debts. Companies that borrow too much and are overleveraged are at the risk of becoming bankrupt if their business does poorly. A company not overly leveraged is better able to sustain drops in their business profits. Businesses that borrow money to add to a product line, expand internationally or upgrade their facilities are often better able to offset the risk they take on when leveraging.

Articles Of Interest

  1.

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.

  2. Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.

  3. What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how check the score.

  4. Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies, or the boot for investors. Find out how to tell the difference.

  5. An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.

  6. Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!

  7. Spotting Cash Cows

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

  8. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  9. Trading Is Timing

    Learn how to make gains even if you don't get in at the right time.

  10. Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center