Financial Leverage and Its Impact on Profit Margin in Pakistan’s Textile Industry

Abstract

The core purpose concerned in this study remains to explore the impact of the financial leverage on the stitched textile industry, and mainly on the profit margin. The textile industry in Pakistan is said to be the largest manufacturing industry and so is the stitching industry increasing with the great importance of readymade dresses especially among females. The objective set in this study remains to study the relationship between the Financial Leverage (FL) and the Profit Margin (PM). This further includes the proving of the idea that the stitched industry becomes more profitable as soon as the financial leverage has been adopted by the companies. The data from 10 Stitched-Textile companies has been gathered as a sample in this study, from the period of 2012 to 2015 for data analysis. The tools used for data analysis comprised of descriptive analysis, correlation analysis,and regression analysis. The results from this analysis conclude that in the stitching industry there is no significance recognition but positive impact on the FL by the PM. Therefore, it is being recommended that the best possible use of the FL should be made by the stitched industry in order to achieve the target of becoming the most profitable industry of Pakistan Textile Industry. Furthermore, it could be noted that the optimum increase in the production of the textile industry would help in minimizing the level of poverty in Pakistan and also building a healthy population.

Keywords: Financial Leverage; Profit Margin, Stitched-Textile Industry, profitability.

DOI: 10.7176/EJBM/11-12-13

Publication date: April 30^th 2019