leverage

Tag: leverage

Navigating Black Swan Events

Ever seen a black swan? The term was coined by Nassim Nicholas Taleb. A finance professor and former Wall Street Trader, Taleb created the term in his book, “The Black Swan”. It describes a situation that is both unexpected and hard to predict. Events like 9/11, Brexit, and natural events (like an earthquake) have caused

Read More

5 Signs It’s Time to Restructure Your Company 

Over the course of my 30+ years of financial experience, I’ve had a number of restructuring transactions. What I have found is that many companies do not know when it’s time to restructure their company. Instead, they wait until it’s too late and it becomes a liquidation event.  Restructuring can mean different things, there are restructuring

Read More

Key Elements When Seeking Financing

This past week, one of my clients met with a banker to develop a new banking relationship. He hands the banker the company’s financial statements, expecting the banker to look at the income statement. Instead, the banker flips to the back of the financial statements to look over the balance sheet. As the coach, I

Read More

Debt to Equity

See Also: Debt to Equity Ratio Return on Equity Analysis Debt to Equity Ratio The debt to equity ratio is also known as the net gearing ratio. It is a type of leverage ratio that helps show how leveraged a company is. Investors and creditors often use this. The purpose is to see what ratio of

Read More

Other People’s Money

Other People’s Money (OPM) In finance, other people’s money, or OPM, is a slang term that refers to financial leverage. Other people’s money refers to borrowed capital that is used to increase the potential returns as well as the risks of an investment. OPM can be used by individuals or by corporations. Using other people’s

Read More

Operating Leverage

See Also: Homemade Leverage Valuation Methods Financial Ratios Operating Profit Margin Ratio Operating Cycle What Your Banker Wants You to Know Operating Leverage Definition Operating leverage is a measure of the combination of fixed costs and variable costs in a company’s cost structure. A company with high fixed costs and low variable costs has high

Read More

Homemade Leverage

Homemade Leverage Definition In finance, homemade leverage is a technique individual investors can use to synthetically adjust the leverage of a firm. To replicate the effects of leverage in the firm, the individual investor borrows money at the same borrowing rate as the company. They need to add leverage to their portfolio. If an investor invests in an

Read More

Hedge Funds

See Also Currency Exchange Rates Hedging Risk Currency Swap Transaction Exposure Exchange Traded Funds Hedge Funds Defined What is a hedge fund? A hedge fund is a private investment portfolio that makes aggressive speculative investments. Because hedge funds often have a very high minimum investment requirement, hedge fund investors are typically only institutional investors and

Read More

Financial Position

See Also: Financial Assets Chief Financial Officer (CFO) Statement of Financial Accounting Standards (SFAS) Pro-Forma Financial Statements Bank Statement Financial Position Definition The financial position definition the status of financial well-being regarding a company, is important to every single business. The financial position of a company is measured by the performance it takes in company

Read More

Financial Leverage

See Also: Finance Beta Definition Finance Derivatives Hedge Funds Hedging Risk Financial Ratios Financial Leverage Definition In finance, leverage refers to using borrowed capital or financial derivatives to magnify the results of an investment. The value of a leveraged investment is greater than the value of the original capital contributed by the investor. When leveraging an investment,

Read More

Equity Multiplier Definition

See Also: Define Leverage (Finance) Operating Leverage Long Term Debt to Total Asset Ratio Analysis Debt Ratio Analysis Equity Multiplier Definition The equity multiplier definition, also referred to as leverage of a company, is the amount of debt and other liabilities a firm has assumed as a percentage of the total assets on average throughout

Read More

Company Debt: Pay Down or Borrow?

Many companies have been making a profit over the past few years. As a result, they have generated quite a bit of liquidity. With the banks calling on them offering tons of cash and low interest rates they are faced with the decision of either to pay down their company debt or borrow more? Company

Read More