Analysis of Leverages and Profitability of Top 10 IT Companies in India

Abstract

Firms utilize leverage to expand assets, cash flows, and revenue, which can lead to increased losses. There are two major types of leverage: financial and operational. To raise financial leverage, a company can borrow money by issuing fixed-income securities or directly from lenders. The researcher focused on secondary data and used correlation and regression analysis for this study. The correlation result shows that the relationship between return on equity and operating leverage is positive at the 5% level, and the relationship between combined leverage and financial leverage is highly significant at the 1% level. Further, the multiple regression result showed that H₀¹ and H₀² are rejected at the 5% level, and combined leverage has an insignificant return on equity. Therefore, H₀³ is accepted. However, the study revealed that the financial and operating leverage of India's top 10 IT companies are satisfactory.