Leveraged Finance Template

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Leveraged Finance Template

This leveraged finance template shows the calculation of the internal rate of return of an investment with different levels of leverage.

This is what the leveraged finance template looks like:

Leveraged Finance Template

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Leveraged finance is the use of an above-normal amount of debt, as opposed to equity or cash, to finance the purchase of investment assets. Leveraged finance is done with the goal of increasing an investment’s potential returns, assuming the investment increases in value.

Private equity firms and leveraged buyout firms will employ as much leverage as possible to enhance their investment’s internal rate of return or IRR.

The Effects of Leverage

The effective cost of debt is lower than equity (since debt holders are always paid out before equity holders, and hence its lower risk).

Leverage, however, will also increase the volatility of a company’s earnings and cash flow, as well as the risk of lending to or owning said company. These risks will include factors such as – but not limited to – changes in the company’s liquidity, the stability of its industry, and shifts in the economy such as interest rates.

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Additional Resources

CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:

The Financial Modeling Certification

Analyst Certification FMVA® Program

The Financial Modeling Certification

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.

A well rounded financial analyst possesses all of the above skills!

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover: