What is the term for borrowing funds with the expectation of earning a greater return than the cost of the borrowed funds?

The term that refers to borrowing funds with the expectation of earning a greater return than the cost of the borrowed funds is leverage. Leverage is a financial strategy that allows an individual or organization to amplify their potential returns by using borrowed capital. The underlying principle is that if the return on the investment made with the borrowed funds exceeds the interest cost of that borrowing, the investor can achieve a higher overall return on their investment.

In a leveraging situation, the investor uses debt to finance investments while anticipating that the income generated from these investments will surpass the debt service obligations. This can lead to increased profits relative to the initial equity invested.

Equity, on the other hand, refers to ownership interest in an asset or business, not directly related to the act of borrowing funds. Investment generally refers to the process of allocating resources, usually money, to generate income or profit, but it does not specifically indicate borrowing for this purpose. Cash flow denotes the total amount of money being transferred into and out of a business, indicating liquidity but not the act of leveraging borrowed funds for investment returns.