An Empirical Study on the Impact of Financial Leverage on the Profitability of Reliance Industries Ltd. among BSE-30 Companies

Abstract

Oil and gas industry is among the eight core industries in India and has a crucial role to play towards affecting the general economic growth of the nation. In the current study, the independent variable will be financial leverage, and dependent variables will be the Net Profit Ratio (NPR), Earnings per share (EPS), Return on Equity (ROE) and Return on Assets (ROA). The research is premised on secondary data that would rely on the annual consolidated financial statements of Reliance Industries Ltd in a span of five years between 2020-21 and 2024-25. The correlation analysis is used in order to examine the relationship between financial leverage and profitability, and the linear regression analysis is used to examine the influence of financial leverage on the profitability indicators. The results indicate that financial leverage is not significantly related to EPS and is significantly positively related to NPR, ROE, and ROA. Nevertheless, the outcome of the regression analysis shows that the financial leverage is not statistically significant to the overall profitability of Reliance Industries Ltd in the study period with an exception of ROE. The research concludes that financial leverage does not play a significant role in the overall profitability of Reliance Industries Ltd. over the period of study. It means that there is no change in the levels of leverage that has a consistent impact on all levels of profitability. So, it is important to have an optimal capital structure in order to maximize the return to shareholders without raising the financial risk.