A Study on Impact of leverage on Profitability of Selected Electricity Firms in India

Abstract

This study investigates the connection between profitability (ROA and ROE) and leverages (financial leverage, operating leverage, combined leverage). It also seeks to clarify how fixed operating costs and fixed financing costs impact a company’s profitability. In this study, three Indian electrical companies are ‘National Thermal Power Corporation’, ‘Power Grid Corporation Limited’, and ‘Adani Power’ were chosen using financial data collected over a seven-year period between 2018-2024. Utilizing descriptive statistics, correlation and regression, the hypothesis is investigated. The findings demonstrate that leverage and profitability are linked, and that leverages have an impact on a company’s profitability.
The study is analyzed based on performance, which is measured with independent and dependent variables such as ROA, ROE, Financial leverage, Operating leverage, Combined leverage, DAR, and DER which is predict the connection between these leverages and which tells about which industries are doing best and which companies have declined.
Here, the research is accomplished on the basis of secondary data. The financial data is gathered by the annual report websites. The purpose of the study was to find out how the independent factors affected the industry’s ROA and ROE in addition the company’s capacity to retain profitability.