\"Leverage\" - An Analysis and its Impact on Profitability with Reference to Selected Cement Companies in India

Chandrakumarmangalam, S.; Govindasamy, P.
December 2010
European Journal of Economics, Finance & Administrative Sciences;Dec2010, Issue 27, p53
Academic Journal
The major objective of this paper is to analyze and understand the impact of leverage on the profitability of the firm. This paper investigates the relationship between the leverage (financial leverage, operating leverage and combined leverage) and the earning per share. And it aims to describe how the earning capacity of the firm is influenced by the fixed operating costs and the fixed financial charges. This study also explains the relationship between the Debt equity ratio and Earning per Share and how effectively the firm be able debt financing. In this study, selected Cement companies are taken for analysis and hypothesis are examined with the help of one way ANOVA and t-test. Apart from that, other tools like skew ness and kurtosis are applied to examine \"Lack of symmetry\" used to understand the distribution of data and 'Flatness or peaked ness'. The results suggest that the leverage and profitability and growth are related and the leverage is having impact on the profitability of the firm.


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