Leverage and ROE
If we have to check real effect of leverage on Return on Equity (ROE), we have to study financial leverage. Financial leverage refers to the use of debt to acquire additional assets. Financial leverage may decrease or increase ROE in different conditions. Financial over-leveraging means incurring a huge debt by borrowing funds at a lower rate of interest and using the excess funds in high risk investments in order to maximize returns.
Read more about this topic: Leverage (finance)
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