If you want to explore equity financing, we Accounting Periods and Methods have a list of the VCs and angels investing in SaaS businesses in 2025, which includes industries of interest, check sizes, and more. Financial leverage refers to the use of borrowed funds (long-term debt) to increase the potential return on investment. Financial leverage is a type of debt used to increase potential ROI. It can be beneficial, as well as hold a lot of risk. Here’s how you can appropriately use debt leverage to grow your business.

Debt Financing

On December 1, Campbell Co. borrowed \( \$ 10,000 \) cash from Second Bank by signing a 90 https://www.bookstime.com/ -day, \( 6 \% \) interest-bearing note. On December 31, Campbell accrued interest expense of \( \$ 50 \). On March 1 , the due date of the note, Campbell will record th…

Equity Financing

By using debt rather than solely relying on equity, financial professionals can amplify profits when investments perform well. This strategy allows businesses and investors successful use of financial leverage requires a firm to to control larger assets with less capital, potentially boosting earnings. However, it also introduces higher risk, as losses are also magnified if the investment underperforms. At the end of the day, while you’d most likely be celebrated for making additional income for the business, you’d absolutely get canned for taking unnecessary risks with the business’ cash and debt.