Levered

Levered is the past participle of lever and is used as an adjective in several technical contexts. In everyday usage it describes something operated or moved by a lever. In finance, levered refers to an entity, investment, or metric that incorporates financial leverage, i.e., debt.

In corporate finance, financial leverage increases potential return on equity but also increases risk. A levered firm uses debt in its capital structure; ratios such as debt-to-equity, debt-to-assets, and the equity multiplier quantify leverage. Levered beta adjusts a firm's equity risk to reflect debt levels. The concept contrasts with unlevered, which describes a firm or investment that has little or no debt.

Leveraged buyouts are a notable application of leverage, where a significant portion of the purchase price is financed with debt. The acquired company’s cash flows are used to service the debt, creating high financial risk if cash flow underperforms.

In investing, levered products such as levered exchange-traded funds or mutual funds aim to magnify exposure using derivatives. They can deliver magnified returns but also magnified losses and typically reset daily, which can affect long-term performance.

In mechanical contexts, levered describes a mechanism or action that relies on a lever to multiply force or movement. Any device or process that uses a lever to achieve a greater effect can be described as levered.