overleveraged

Meanings

• adjective

  Having a debt load that is significantly higher than the value of the assets that secure the debt.

  - "The company's operations became overleveraged, leading to bankruptcy."
  - "The investor's portfolio was overleveraged with too much debt relative to his assets."

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Variants

List of all variants of overleveraged that leads to same result
overleap , overleaped , overleaping , overleaps , overleapt

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Etymology

origin and the way in which meanings have changed throughout history.

The term 'overleveraged' is derived from the words 'leverage' (the use of debt or borrowed capital to increase the potential return of an investment) and 'over' (excessive or beyond).

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Trivia

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1. Overleveraging was a major factor in the collapse of Long-Term Capital Management, a hedge fund that nearly caused a financial crisis in 1998.

2. The term 'overleveraged' was first used in the context of finance in the early 20th century.

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Related Concepts

informations on related concepts or terms closely associated with the word. Discuss semantic fields or domains that the word belongs to

1. Debt-to-Equity Ratio: A financial ratio that shows the proportion of debt to equity in a company's capital structure.

2. Leverage Ratio: A financial ratio that measures the amount of borrowed capital a company is using in its operations.

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Culture

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Overleveraging has been a significant factor in various financial crises throughout history, such as the 2008 global financial crisis. It is often portrayed negatively in finance literature and media.

How to Memorize "overleveraged"

1. visualize
   

   - Visualize a scale with assets on one side and debt on the other. When the debt side is heavier than the asset side, the situation is overleveraged.

2. associate
   

   - Associate the term 'overleveraged' with the image of a house of cards that can easily collapse due to excessive debt.

3. mnemonics
   

   - Use the mnemonic 'OVERLEVERAGED': O - Own too much debt; V - Value of assets is lower than debt; E - Excessive risk is taken; R - Return on investment may be high but also risky; L - Long-term sustainability is questionable; E - Economic downturns can lead to bankruptcy; V - Value of assets may decrease; A - Assets may not cover the debt; G - Greater potential for financial instability; E - Excessive borrowing can lead to insolvency.

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