Generally, companies have two options when they wish to raise money. They can issue shares of stock, which are also

Leverage title screen

known as equities. Alternatively, they can issue bonds, which are also known as debt instruments. Leverage ratios tell investors how much debt a company has outstanding relative to the equity in their capital structure. I will write the above soon, lets discuss about Leverage and debt now.

Recently Sen. Rob Portman (R-Ohio) with Politico said, “Let’s use the debt limit, yes, as leverage.” As a practical matter, what he meant was, congressional Republicans should threaten to hurt Americans on purpose unless President Obama agrees to slash public investments. Because the White House won’t want such a catastrophe, Republicans will have “leverage” that Portman wants to see his party “use.”

In the finance world, debt and leverage are used interchangeably. Continue reading

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