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Finance
Overleveraged
When a company or person has taken on too much debt relative to their income or assets.
Overleveraged companies are vulnerable in downturns. Banks and rating agencies watch debt ratios closely. Reducing leverage (paying down debt) is often a priority when times are good.
It's carrying a backpack so heavy that even a small hill makes you fall over.
Real world: A company with £10 million profit but £200 million debt is overleveraged. A small drop in profit can make it unable to pay interest, leading to default or forced asset sales.
💡 Being overleveraged feels great in good times but can be fatal when things turn bad.