Negative leverage, also referred to as reverse leverage, occurs when the cost of borrowing exceeds the returns generated from investments. This situation creates a net loss for the investor, contrasting with positive leverage where borrowed funds generate higher returns.
Reverse leverage, also known as negative leverage, occurs when the financial benefits from ownership accrue at a lower rate than the interest rate paid for borrowed money.
Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.