What is Leverage? And How can it Increase Returns (albeit at Higher Risks)?

In the financial world, professionals throw around words such as “leverage”, “margin”, using “loans to magnify returns”, “cash-out refinancing”, “debt-powered return multipliers” to increase rates of return. Do you ever wonder what these mean? I talking about what they really mean at the core of it? Well, the same fundamental mathematical idea underpins all of these concepts. This short video explains that mathematical idea, as well as the risks associated with it. While Dave Ramsey certainly isn’t a fan of anything related to debt (except your mortgage), it’s important to understand the mathematical “why” behind this.