Financial Leverage Practice of Indian Telecommunications Ltd.: Bane or boon?
Case number:
A02-24–0013
Abstract
Financial leverage measures firm’s ability to use debt for shareholders’ benefit. A high degree of financial leverage maximizes shareholders’ return, but it also exposes them to a higher risk. It is beneficial only when the return on assets is higher than the fixed financial costs. The telecommunication sector is a low-leveraged sector. The present case explores the effect of financial leverage on shareholders’ return of Indian Telecommunications Ltd., a leading telecommunication company in India.
Teaching
Students will learn: To know the financial leverage application to business world; to study the impact of financial leverage on shareholders’ wealth maximization; to appreciate the importance of cost of capital in capital structure decision; to illustrate the application of financial leverage in determining an ideal capital structure of the firm.
Case number:
A02-24–0013
Year:
Setting:
Asia; India
Length:
5 pages
Source:
Published Sources
Topics
