Learn about leverage in financing

Leverage is a financial strategy that involves using external capital to acquire assets and maximize the return on investment. This is achieved through the use of debt, equity or both. Using this strategy, it is possible to improve investment performance in the short, medium and long term, by investing less than the total value of the investments.

This strategy is mainly used by investors in [Private Equity](/en/blog/quest-ce-que-le-private-equity-pe), Private Equity and Venture Capital. Venture capital funds and individuals can also use leverage to optimize their portfolio and increase their rate of return.

Leverage can be achieved by borrowing a sum of money and investing all the funds in an asset or portfolio of assets. The leverage ratio is generally calculated on the basis of the company's assets and liabilities, and corresponds to the ratio of debt to equity. If debt increases relative to equity, the leverage ratio increases.

Finally, it's worth mentioning that while leverage can increase the return on an investment, it can also significantly increase the risk of financial loss. Therefore, when deciding to use leverage, it is important to examine the risks involved and take appropriate measures to minimize these risks.