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A Study on Leverage Analysis of Nestle India

Dr. R. Vasuki, P. Megala Devi, P. Priya

Abstract


The effect of financial leverage is studied each at a market and a firm level wherever the firm is exposed to each individual and market risk. Financial leverage measures firm’s exposure to the financial risk. Leverage refers to “an increase means accomplishing some purposes”. The concept of leverage is valid in business conjointly. The term leverage is used to explain the firm’s ability to use fixed charge assets or funds to extend the return to its owners, i.e., equity shareholders. The fastened value (also known as fixed in operation cost) and glued come (called operating cost) remains constant no matter the amendment in volume of output or sales. Thus, the employment of a quality or a supply of funds that the firm has got to pay the fixed charge or come includes a wide influence on earnings obtainable for equity shareholders. The financial leverage utilized by a firm is meant to earn a lot of on the fastened charges funds than their relative prices. A high level of financial leverage permits shareholders to get a high come on equity, but they are conjointly exposed to a better risk of great loss, if the return on assets is lower. In this paper a comparative study and analysis of firm’s financial leverage, operating leverage and combined leverage has been done of 10 years i.e. from 2004–2005 to 2013–2014.

Keywords: combined leverage, financial leverage, operating leverage

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References


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DOI: https://doi.org/10.37628/ijied.v1i1.132

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