By BUGATHA KARUNA Under Guidance of

Ms.SHWETHA.N

BANGALORE UNIVERSITY 2011-2013

Leverages has been defined as the action of a lever and mechanical advantage 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 means which 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

Aviation is one of the most significant influences of our time and empowers a nation with technological strength. It is a major tool for economic development and has a significant role in national security and international relations. India has been fortunate to have launched its aeronautics industry in 1940.

HINDUSTAN AERONAUTICS LIMITED a PSU under ministry of defences, Government of India centered on the group of companies in Bangalore, is term as a premier Aerospaces Industry in south East Asia. It is vertically integrated organization involved in Design and Development; manufacturing, Maintenance, Repairs and Overhaul of Helicopter, Aero-engines, Avionics &accessories. Besides these, HAL also manufacture complex structure for Aerospace.In the Aeronautics sector, India has carved out a niche for itself for itself the advance light Helicopter, ALH (Dhruv), indigenously designed and produced by HAL as acknowledged as a state of the Art product,& the Supersonic Light Combat Aircraft has attracted global attention.

OBJECTIVE OF THE STUDY

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 after each year of leverage analysis. To ascertain the projection evaluation of the latest financial statement. To analyze the differential changes of the leverages during selected duration.

STATEMENT OF THE PROBLEM

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 upward trend 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 on the sales and profitability of the organization.

Research Methodology
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 is observed or collected directly from the first hand sources. It is a data which helps as an evidence for the results.

SECONDARY DATA:

Secondary data is the data that have been already collected by and readily available from other sources. Such data are cheaper and more quickly obtainable than the primary data and also may be available when primary data cannot be obtained at all. For conducting the study, the reliable source will be financial statements journals magazines, audited reports of the organization.

PLAN OF ANALYSIS
The data will be collected with the help of secondary source and the same will be analyzed by applying pure financial tools. The results that are going to be emerged from the analysis will be later be described in the form of the applicable charts and graphs.

TOOLS OF ANALYSIS
Financial leverage : Operating Income Taxable Income : Contribution EBIT Operating leverage

Contribution = Sales Variables EBIT= Earnings Before Interest And Tax

Combine leverage : Operating Leverage X Financial Leverage . Return on capital employed

EBIT Capital Employed

Profit margin :

EBIT
X 100 Capital employed

Asset leverage

Sales Capital Employed

DOL = EBIT+ Fixed costs

EBIT DFL = EBIT

EBIT Total Interest Expenses DCL = DOL X DFL


DFL : DEGREE OF FINANCIAL LEVERAGE DCL: DEGREE OF COMBINED LEVERAGE DOL: DEGREE OF OPERATING LEVERAGE EBIT : EARNING BEFORE INTEREST AND TAX

THANK YOU