Work out leverage effect instantly with clear inputs, formula shown and shareable results.
Leverage multiplies the gap between the asset return and the borrowing cost onto your own capital. It works only while the asset out-earns the debt; below the break-even return it amplifies losses just as effectively.
Levered return
Return on equity = [(E+B)r_a - B·r_b] / E; break-even r_a = B·r_b/(E+B)
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
The same multiplier applies to losses. A four-times levered position loses your entire capital on a 25% asset fall.
Both matter, but the spread between asset return and borrowing cost is what determines whether leverage helps at all.