Leverage
This is a preview of a concept contained in The Personal MBA by Josh Kaufman, a book that will help you master the fundamentals of business, hone your business instincts, and save a fortune in tuition. The Personal MBA distills the most powerful principles of business and delivers them quickly and concisely. Order your copy now…
What is “Leverage”?
“We’ve been criticized for not understanding what the word leverage means… We do know what leverage means, and having a few million dollars cash in the bank is much nicer than being heavily leveraged.” — Kenneth H. Olsen, founder of the Digital Equipment Corporation (DEC), which was acquired by Compaq in 1998
Key Points:
- Leverage is the practice of using borrowed money to magnify potential gains.
- Leverage is a form of financial Amplification. It magnifies gains and losses.
- Using Leverage is dangerous. Never do it unless you are aware of the financial risks for yourself and your business.
Questions for Consideration:
- Does leverage make sense for your particular business idea?
- What opportunities and risks does leverage present, given your current situation and goals?
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