Reverse leverage

Reverse leverage occurs when the proceeds from an investment are lower than the cost of funds of a business. In this situation, a business should unwind the investment and pay back the associated funds; otherwise, the firm will continue to experience negative cash flows that could eventually lead to its demise. During periods of spiking interest rates, it is especially critical to review whether reverse leverage is occurring.

Related Courses

Corporate Finance 
Financial Analysis 
The Interpretation of Financial Statements