Deleveraging


Deleveraging is the unwinding of debt. It is a company's attempt to decrease its financial leverage. If it is unable to pay off its existing debt, the company will be in significant risk of defaulting.[1]

Although companies often take on excessive debt to spur initial growth, increasing leverage increases a firm's risk. Deleveraging attempts to lower risk.

When a firm deleverages its balance sheet, it is a sign to investors of slowing growth.[2]



References

  1. Deleverage. Investopedia.
  2. Deleverage. The Free Dictionary.
Last modified on 6 June 2013, at 08:16