Relationship between Financial Leverage and Profitability of Textile Companies of India

This paper attempt to find out relation between financial leverage and textile companies’ profitability. For this purpose, sample of 150 company year has been used in this research which include 30 textile companies’ five years data covering from year 2013 to year 2017. Ratio analysis used in this research to measure financial leverage of textile companies and profitability of textile companies. Debt Ratio has been used in this research as an indicator of financial leverage while as an indicator of profitability, Net Profit Margin, Return on Assets, Return on Equity and Earning per Share has been used. Correlation analysis and Regression analysis has been used in this research to evaluate relation between financial leverage and profitability of textile companies. This research found that Debt ratio is negatively and significantly related with all indicators of profitability which indicates that financial leverage has a significant negative impact on textile companies’ profitability.