A synopsis a study on the impact of leverage on profitability of HAL

7/29/2019 A synopsis a study on the impact of leverage on profitability of HAL

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By

BUGATHA KARUNA

Under Guidance of

Ms.SHWETHA.N

BANGALORE UNIVERSITY

2011-2013


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Leverages has been defined as the action of a lever and mechanicaladva

ntage gained by it. A lever is a rigid piece that transmits and

modifies forces or motion where forces are applied at two points and

turns around a third. In simple words, it is a force applied at a

particular point to get the desired result. The principle of the lever

is instinctively appealing to, most. It is the principle that permits the

magnification of force when a lever is applied to a fulcrum. The term

leverage, it is possible to lift the objects, which is otherwise impossible.

The term leverage refers generally to circumstances which bring about

an increase in income volatility .In business, leverage is the meanswhich business, leverage is the means which a business firm can

increase the profit. The force will be applied on debt; the benefit of this

is reflected in the form higher return to equity shareholder.

INTRODUCTION


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Aviation is one of the most significant influences of our time andempowers a nation with technological strength. It is a major tool foreconomic development and has a significant role in national

security and international relations. India has been fortunate tohave

launched its aeronautics industry in 1940.

HINDUSTAN AERONAUTICS LIMITED a PSU under ministryof defences, Government of India centered on the group of

companies in Bangalore, is term as a premier Aerospaces Industryin south East Asia. It is vertically integrated organization involvedin Design and Development; manufacturing, Maintenance, Repairsand Overhaul of Helicopter, Aero-engines, Avionics &accessories.Besides these, HAL also manufacture complex structure forAerospace.In the Aeronautics sector, India has carved out a nichefor itself for itself the advance light Helicopter, ALH (Dhruv),indigenously designed and produced by HAL as acknowledged asa state of the Art product,& the Supersonic Light Combat Aircrafthas attracted global attention.


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To analyze the impact of the leverages on sales and profitability

of the organization.

To ascertain the business risk, financial risk and operating risk.

To analyze the different financial strategies being adapted aftereach year of leverage analysis.

To ascertain the projection evaluation of the latest financialstatement.

To analyze the differential changes of the leverages duringselected duration.

OBJECTIVE OF THE STUDY


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Every company will be bothered about the main two

terminologies that is the sales and profitability .To

maintain consistency as well as to have an upwardtrend of the sales and profitability the financial concept

of the leverage plays an importance role in every

business activity . Hence it becomes vital to study the

importance of leverages and the impact of the same onthe sales and profitability of the organization.

STATEMENT OF THE PROBLEM


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METHODOLOGY:

The study will be based on the analytical descriptive

research design which will help in finding facts.

SOURCE OF DATA:

Primary data: Primary data is a data which isobserved or collected directly from the first handsources. It is a data which helps as an evidence forthe results.

Research Methodology


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SECONDARY DATA:

Secondary data is the data that have been alreadycollected by and readily available from other

sources. Such data are cheaper and more quicklyobtainable than the primary data and also may beavailable when primary data cannot be obtained atall.

For conducting the study, the reliable source will befinancial statements journals magazines, auditedreports of the organization.


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The data will be collected with the help ofsecondary source and the same will beanalyzed by applying pure financial tools.The results that are going to be emerged fromthe analysis will be later be described in the

form of the applicable charts and graphs.

PLAN OF ANALYSIS


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Financial leverage : Operating Income

Taxable Income

Operating leverage : Contribution

EBIT

Contribution = Sales Variables

EBIT= Earnings Before Interest And Tax

TOOLS OF ANALYSIS


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Combine leverage : Operating Leverage X Financial

Leverage .

Return on capital employed : EBIT

Capital Employed

Profit margin : EBIT

X 100

Capital employed


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Asset leverage : Sales

Capital Employed

DOL = EBIT+ Fixed costs

EBIT

DFL = EBIT

EBIT Total Interest Expenses

DCL = DOL X DFL


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DFL : DEGREE OF FINANCIAL LEVERAGE

DCL: DEGREE OF COMBINED LEVERAGE

DOL: DEGREE OF OPERATING LEVERAGE

EBIT : EARNING BEFORE INTEREST AND TAX


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THANK YOU

A synopsis a study on the impact of leverage on profitability of HAL

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