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Asian Journal of Management
Year : 2015, Volume : 6, Issue : 4
First page : ( 276) Last page : ( 282)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2015.00040.2

Impact of Financial Leverage on Profitability of Fast Moving Consumer Goods Companies Listed on BSE

Kaur Jasminder1, Dr Kaur Harsh Vineet2

1Assistant Professor, Institute of Management Studies, Bhaddal, Ropar

2Assistant Professor, School of Commerce and Management, Sri Guru Granth Sahib World University, Fatehgarh, Sahib

Corresponding Author E-mail:

Online published on 21 December, 2015.


The paper focuses to investigate the effect of leverage on profitability of companies in FMCG Sector in India. For the purpose of the study of the relationship between leverage(independent variable) is defined in terms of Financial Leverage and Profitability (dependent variable) is defined in terms of earning per share, return on net worth (return on equity), and net profit margin. The data base is fast moving consumer goods companies listed on S&P BSE FMCG Index. The research techniques include Karl Pearson Correlation and T-Test. The data of five year period from F.Y 2009-10 to 2013-14 is taken for the purpose of the study. It is expected that financial leverage exerts its influence over profitability margin and investment. The results indicate that three among seven companies under study have witnessed negative correlation between EPS and degree of financial leverage, while four companies have faced decline in return on net worth as aftermath of leverage adopted by them. It is apparent that presence of debt has not brought any positive change in net profit margins which could be due to the fact that higher interest payments cause decline in net profits.



Capital structure, financial leverage and profitability ratios.


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