Rapport Between Leverage and Profitability: A Study of TVS Motor Company

Abstract

Leverage analysis can be defined as a process of identifying the financial strength and weakness of a firm from the available data and financial statements. A firm needs funds so run and manage its activities. The funds are needed to set up an enterprise and then to implement expansion, diversification and other plans. A decision has to be made regarding the composition of funds. In this paper an attempt has been made to analyze the impact of leverage on the profitability and performance of the company. For the purpose of the study TVS motor Co. has been selected and for analysis purpose the basic statistical tools like Mean, SD, CV, CAGR, ANOVA(one way) have been used and in order to measure the impact the OLS simple Linear regression model has been used, the study covers a period of ten years from 2006 to 2016. Results suggested that the operating, financial and combined leverage of the company does not play any major role in making investment decisions of the company. And it was also found that the financial, operating and combined leverage of the company has no significant impact on ROA (Return on Assets) and Risk Adjusted (SHROA) of the company.