Study of the Impact of Financial Leverage on the Profitability of NIFTY 50 Companies

Authors

  • Mr. Naveen Kumar Student, Department of Finance and Business Economics, University of Delhi, New Delhi, India
  • Dr. Nidhi Jain Associate Professor, Department of Finance and Business Economics, University of Delhi, New Delhi, India

Keywords:

Financial leverage, return on assets, ordinary lease square, OLS, Eviews, Hypothesis testing

Abstract

The primary objective of the present research is to examine the impact of financial leverage on the profitability of the companies. The secondary objective is to analyze if there is any individual significant impact of short-term leverage and long-term leverage on the profitability of the companies. A sample of forty-eight companies from the NIFTY 50 index have been chosen for the study. A company’s performance is measured through return on assets (ROA) and financial leverage is measured through total debt ratio, short-term debt ratio, and long-term debt ratio. Ordinary least square or OLS method and Eviews software were used to study the relationship. The study found that financial leverage has a significant, but negative impact on the profitability of a company.

 

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Published

2023-11-04

Issue

Vol. 1 No. 2 (2023): [July- December, 2023]; Management and Finance Bulletin

Section

Articles