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How to calculate the leverage

How to calculate the leverage

Ability to use borrowed money - a necessary skill of a successful businessman.

The loan allows the company to expand and start a new business.

But to borrow the money you need to have a reserve in case of force majeure.

How to calculate the leverage?



In theory, the economy is determined by the leveragethe ratio of the amount of borrowed funds to the amount of available loan taker. Thus, if the bank comes to a man with a guarantee of 100 thousand dollars, and takes credit for a million, the shoulder is 1 to 10.


The use of leverage allowsrepeatedly to increase its profits at the expense of true forecasts, market analysis conjectures. So if analysts can predict with high accuracy the change of one currency relative to another, means at their disposal do not allow to fully increase the amount of their savings at the expense of foreign exchange transactions.


Leverage is used especially incurrency transactions in the Forex markets and trading platforms. Mediator (the guarantor of the transaction) enables traders to use a lot of leverage - leverage could be up to 1: 1000. This means that thousands of dollars in the deal will tap million. In most cases, the guarantor no risk - in case you lose the dealer (if his prediction does not coincide with reality), the guarantor simply take "rate" - itself a thousand dollars or any sum that is the "mainstay" of leverage.


Increase leverage can any insiderinformation proving the success of the forecast, as well as additional guarantees of due reputation loan taker. Thus, any US bank is likely to give a "high" leverage entrepreneur from Germany than from a developing African country. The fact that business in Europe has great guarantees from the government, the German economy itself is an additional guarantee of payment. It follows that the risks affect the leverage - the greater the security, the greater the shoulder itself.


For a financial loan or credit tobank on running your own business provide a detailed business plan. It is desirable to guarantee famous entrepreneurs. These guarantees will increase the leverage itself.

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