Leverage vs. Power — What's the Difference?
By Fiza Rafique & Urooj Arif — Updated on May 19, 2024
Leverage refers to using a tool or strategy to gain a mechanical or strategic advantage, while power is the capacity or ability to perform work or exert force.
Difference Between Leverage and Power
Table of Contents
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Key Differences
Leverage involves using a tool, strategy, or resource to maximize efficiency and achieve greater results. In finance, leverage means using borrowed capital for investment to increase potential returns. In contrast, power generally denotes the capacity to perform work, exert force, or influence others. Power can be physical, such as the strength to lift an object, or abstract, like the influence a leader holds.
Leverage is often seen in mechanical contexts, such as using a lever to lift a heavy object with minimal effort. It can also be strategic, where an individual or organization uses specific resources or tactics to gain an advantage. Power, on the other hand, is more about the inherent ability to perform tasks or influence outcomes directly, whether through physical strength, authority, or control over resources.
In business, leverage can refer to the use of debt to amplify investment returns. By borrowing money, companies can invest in opportunities that they couldn't afford with their own capital alone. Conversely, power in a business context typically refers to the influence or control one has within an organization, often derived from one's position or expertise.
Leverage can also imply dependency on external factors or resources, making it a double-edged sword. While it can magnify gains, it can also amplify losses. Power, however, tends to be more intrinsic, rooted in an individual’s or entity’s capacity, influence, or authority.
Leverage and power are interconnected but distinct concepts. Leverage is about gaining an advantage through strategic means, often external, while power is about the intrinsic ability to effect change or command influence.
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Comparison Chart
Definition
Use of tools/strategies to gain advantage
Capacity to perform work or exert force
Context
Mechanical, strategic, financial
Physical, abstract, influential
Dependency
Often dependent on external resources
Typically intrinsic
Risk Factor
Can amplify both gains and losses
Less directly associated with risk
Business Application
Using debt to enhance returns
Authority or control within an organization
Compare with Definitions
Leverage
Influence or power gained through strategic means.
She leveraged her network to secure the promotion.
Power
The ability to do work or exert force.
The motor has enough power to operate the machinery.
Leverage
Borrowed capital to increase investment potential.
The investor used financial leverage to maximize his stock portfolio returns.
Power
The ability or capacity to do something or act in a particular way
His powers of concentration
The power of speech
I will do everything in my power to help you
Leverage
Strategic use of resources to achieve greater outcomes.
The company leveraged its assets to expand into new markets.
Power
The capacity or ability to direct or influence the behaviour of others or the course of events
She had me in her power
A political process that offers people power over their own lives
Leverage
The ratio of a company's debt to equity.
High leverage can increase a company's return on equity.
Power
Physical strength and force exerted by something or someone
The lyrical power of his prose
The power of the storm
Leverage
The action of a lever.
Power
Energy that is produced by mechanical, electrical, or other means and used to operate a device
Generating power from waste
Power cables
Leverage
The mechanical advantage of a lever.
Power
The rate of doing work, measured in watts or less frequently horse power.
Leverage
Positional advantage; power to act effectively
"started his ... career with far more social leverage than his father had enjoyed" (Doris Kearns Goodwin).
Power
The product obtained when a number is multiplied by itself a certain number of times
2 to the power of 4 equals 16
Leverage
The use of credit or borrowed funds, often for a speculative investment, as in buying securities on margin.
Power
A large number or amount of something
There's a power of difference between farming now and when I was a lad
Leverage
To provide (a company) with leverage.
Power
Supply (a device) with mechanical or electrical energy
A nuclear-powered submarine
The car is powered by a fuel-injected 3.0-litre engine
Leverage
To supplement (money, for example) with leverage.
Power
Move or travel with great speed or force
He powered round a bend
Leverage
To improve or enhance
"It makes more sense to be able to leverage what we [public radio stations] do in a more effective way to our listeners" (Delano Lewis).
Power
The ability or capacity to act or do something effectively
Is it in your power to undo this injustice?.
Leverage
To use so as to obtain an advantage or profit
Leveraged their personal contacts to find new investors.
Power
Often powers A specific capacity, faculty, or aptitude
Her powers of concentration.
Leverage
A force compounded by means of a lever rotating around a pivot; see torque.
A crowbar uses leverage to pry nails out of wood.
Power
Physical strength or force exerted or capable of being exerted
The power of the waves.
Leverage
(by extension) Any influence which is compounded or used to gain an advantage.
Try using competitors’ prices for leverage in the negotiation.
Power
Effectiveness at moving one's emotions or changing how one thinks
A novel of great power.
Leverage
(finance) The use of borrowed funds with a contractually determined return to increase the ability to invest and earn an expected higher return, but usually at high risk.
Leverage is great until something goes wrong with your investments and you still have to pay your debts.
Power
The ability or official capacity to exercise control; authority
How long has that party been in power?.
Leverage
(finance) The debt-to-equity ratio.
Power
The military strength or economic or political influence of a nation or other group
That country projects its power throughout the region.
Leverage
(business) The ability to earn very high returns when operating at high-capacity utilization of a facility.
Their variable-cost-reducing investments have dramatically increased their leverage.
Power
A country, nation, or other political unit having great influence or control over others
The western powers.
Leverage
To use; to exploit; to manipulate in order to take full advantage (of something).
They plan to leverage the publicity into a good distribution agreement.
They plan to leverage off the publicity to get a good distribution agreement.
Power
A supernatural being
The powers of evil.
Leverage
The action of a lever; mechanical advantage gained by the lever.
Power
Powers(Christianity) The sixth of the nine orders of angels in medieval angelology.
Leverage
The mechanical advantage gained by being in a position to use a lever
Power
The energy or motive force by which a physical system or machine is operated
Turbines turned by steam power.
A sailing ship driven by wind power.
Leverage
Strategic advantage; power to act effectively;
Relatively small groups can sometimes exert immense political leverage
Power
The capacity of a system or machine to operate
A vehicle that runs under its own power.
Leverage
Investing with borrowed money as a way to amplify potential gains (at the risk of greater losses)
Power
Electrical or mechanical energy, especially as used to assist or replace human energy.
Leverage
Supplement with leverage;
Leverage the money that is already available
Power
Electricity supplied to a home, building, or community
A storm that cut off power to the whole region.
Leverage
Provide with leverage;
We need to leverage this company
Power
(Physics) The rate at which work is done, expressed as the amount of work per unit time and commonly measured in units such as the watt and horsepower.
Leverage
Using a tool to gain mechanical advantage.
She used a lever to lift the heavy stone, applying leverage to make it easier.
Power
The product of applied potential difference and current in a direct-current circuit.
Power
The product of the effective values of the voltage and current with the cosine of the phase angle between current and voltage in an alternating-current circuit.
Power
See exponent.
Power
The number of elements in a finite set.
Power
(Statistics) In a statistical test, the probability of correctly rejecting the null hypothesis when it is false.
Power
A measure of the magnification of an optical instrument, such as a microscope or telescope.
Power
Chiefly Upper Southern US A large number or amount. See Note at powerful.
Power
(Archaic) An armed force.
Power
Of or relating to political, social, or economic control
A power struggle.
A power base.
Power
Operated with mechanical or electrical energy in place of bodily exertion
A power tool.
Power car windows.
Power
Of or relating to the generation or transmission of electricity
Power companies.
Power lines.
Power
(Informal) Of or relating to influential business or professional practices
A pinstriped suit with a power tie.
Met with high-level executives at a power breakfast.
Power
To supply with power, especially mechanical or electrical power.
Power
The ability to do or undergo something.
Power
(social) The ability to coerce, influence, or control.
Power
(countable) The ability to affect or influence.
Power
Control or coercion, particularly legal or political (jurisdiction).
Power
The people in charge of legal or political power, the government.
Power
(metonymically) An influential nation, company, or other such body.
Power
An army, a military force.
Power
Effectiveness.
Power
Physical force or strength.
He needed a lot of power to hit the ball out of the stadium.
Power
Electricity or a supply of electricity.
After the pylons collapsed, this town was without power for a few days.
Power
A measure of the rate of doing work or transferring energy.
Power
The strength by which a lens or mirror magnifies an optical image.
We need a microscope with higher power.
Power
A large amount or number.
Power
Any of the elementary forms or parts of machines: three primary (the lever, inclined plane, and pulley) and three secondary (the wheel-and-axle, wedge, and screw).
The mechanical powers
Power
A measure of the effectiveness that a force producing a physical effect has over time. If linear, the quotient of: (force multiplied by the displacement of or in an object) ÷ time. If rotational, the quotient of: (force multiplied by the angle of displacement) ÷ time.
Power
(mathematics)
Power
A product of equal factors (and generalizations of this notion): , read as " to the power of " or the like, is called a power and denotes the product , where appears times in the product; is called the base and the exponent.
Power
(set theory) Cardinality.
Power
(statistics) The probability that a statistical test will reject the null hypothesis when the alternative hypothesis is true.
Power
In Christian angelology, an intermediate level of angels, ranked above archangels, but exact position varies by classification scheme.
Power
(transitive) To provide power for (a mechanical or electronic device).
This CD player is powered by batteries.
Power
(transitive) To hit or kick something forcefully.
Power
To enable or provide the impetus for.
Power
Impressive.
Power
Same as Poor, the fish.
Power
Ability to act, regarded as latent or inherent; the faculty of doing or performing something; capacity for action or performance; capability of producing an effect, whether physical or moral: potency; might; as, a man of great power; the power of capillary attraction; money gives power.
Power
Ability, regarded as put forth or exerted; strength, force, or energy in action; as, the power of steam in moving an engine; the power of truth, or of argument, in producing conviction; the power of enthusiasm.
Power
Capacity of undergoing or suffering; fitness to be acted upon; susceptibility; - called also passive power; as, great power of endurance.
Power, then, is active and passive; faculty is active power or capacity; capacity is passive power.
Power
The exercise of a faculty; the employment of strength; the exercise of any kind of control; influence; dominion; sway; command; government.
Power is no blessing in itself but when it is employed to protect the innocent.
Power
The agent exercising an ability to act; an individual invested with authority; an institution, or government, which exercises control; as, the great powers of Europe; hence, often, a superhuman agent; a spirit; a divinity.
And the powers of the heavens shall be shaken.
Power
A military or naval force; an army or navy; a great host.
Never such a power . . . Was levied in the body of a land.
Power
A large quantity; a great number; as, a power o good things.
Power
The rate at which mechanical energy is exerted or mechanical work performed, as by an engine or other machine, or an animal, working continuously; as, an engine of twenty horse power.
Power
A mechanical agent; that from which useful mechanical energy is derived; as, water power; steam power; hand power, etc.
Power
The product arising from the multiplication of a number into itself; as, a square is the second power, and a cube is third power, of a number.
Power
A machine acted upon by an animal, and serving as a motor to drive other machinery; as, a dog power.
Power
Mental or moral ability to act; one of the faculties which are possessed by the mind or soul; as, the power of thinking, reasoning, judging, willing, fearing, hoping, etc.
The guiltiness of my mind, the sudden surprise of my powers, drove the grossness . . . into a received belief.
Power
The degree to which a lens, mirror, or any optical instrument, magnifies; in the telescope, and usually in the microscope, the number of times it multiplies, or augments, the apparent diameter of an object; sometimes, in microscopes, the number of times it multiplies the apparent surface.
Power
An authority enabling a person to dispose of an interest vested either in himself or in another person; ownership by appointment.
Power
Hence, vested authority to act in a given case; as, the business was referred to a committee with power.
Power
Possession of controlling influence;
The deterrent power of nuclear weapons
The power of his love saved her
His powerfulness was concealed by a gentle facade
Power
(physics) the rate of doing work; measured in watts (= joules/second)
Power
Possession of the qualities (especially mental qualities) required to do something or get something done;
Danger heightened his powers of discrimination
Power
A state powerful enough to influence events throughout the world
Power
(of a government or government official) holding an office means being in power;
Being in office already gives a candidate a great advantage
During his first year in office
During his first year in power
The power of the president
Power
One possessing or exercising power or influence or authority;
The mysterious presence of an evil power
May the force be with you
The forces of evil
Power
Physical strength
Power
A mathematical notation indicating the number of times a quantity is multiplied by itself
Power
A very wealthy or powerful businessman;
An oil baron
Power
Supply the force or power for the functioning of;
The gasoline powers the engines
Power
Influence or control over others.
The CEO has considerable power within the company.
Power
Physical strength or force.
His power was evident in his ability to lift heavy weights.
Power
Capacity to influence events or outcomes.
Her political power helped pass the new legislation.
Power
Energy transfer rate in physics.
The power output of the solar panel was measured in watts.
Common Curiosities
How does leverage differ from power in a business context?
Leverage involves using resources or strategies to gain an advantage, while power refers to the inherent authority or control one has within an organization.
What is leverage in finance?
Leverage in finance refers to using borrowed funds to increase potential returns on investment.
How can one increase their power in an organization?
Increasing power in an organization can be achieved through gaining expertise, building networks, and demonstrating leadership skills.
Can leverage be risky?
Yes, while leverage can amplify gains, it can also magnify losses, making it a risky strategy if not managed properly.
What is the relationship between leverage and debt?
Leverage often involves using debt to finance investments, increasing potential returns through borrowed capital.
How is leverage used in everyday language?
Leverage in everyday language often means using something to achieve a greater effect or advantage, such as leveraging a skill to get a job.
What does high leverage mean for a company?
High leverage indicates a company has a high level of debt compared to its equity, which can increase potential returns but also risks.
What is an example of power in physics?
Power in physics is the rate at which work is done or energy is transferred, measured in watts.
How does power manifest in social contexts?
Power in social contexts manifests as the ability to influence or control others' actions, decisions, or beliefs.
What is the difference between leverage and influence?
Leverage typically involves using specific resources or strategies for advantage, while influence is the ability to affect others' decisions or actions.
What is mechanical leverage?
Mechanical leverage is the use of a lever or similar tool to gain a physical advantage in moving or lifting objects.
How does leverage relate to risk management?
Effective leverage requires careful risk management to ensure that the potential for amplified gains does not lead to disproportionate losses.
What is strategic leverage?
Strategic leverage involves using resources or tactics to gain a competitive advantage in business or other endeavors.
Can power be intangible?
Yes, power can be intangible, such as the influence a leader has over their followers or the impact of a persuasive argument.
What is the role of power in leadership?
Power in leadership is crucial for guiding, influencing, and motivating others towards achieving common goals and organizational success.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
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Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
