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Leverage is a Killer

Written by admin on June 17th, 2009

Please expand upon the comment “leverage is a killer”.

 

Posted in Uncategorized |

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1 Comments so far ↓

  1. LuckypineFarmer says:
    June 19, 2009 at 22:11

    Leverage costs in the form of interest payments. Most of our commodities are raised on narrow margins. The volatility in input costs and commodity prices requires discipline to insure debt payments are covered. Failing to cashflow leveraged debt quickly erodes capital and thus the equity one has at risk. The recent housing crisis is a prime example of leveraged debt. If the homeowner makes payments and housing values increase, the return on equity is multiplied by leverage. Conversely, if interest increases, payment fall behind and home values decrease the result is disasterous.

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