Vol. 1, Issue 11, Part A (2015)

Abstract
The survival of a firm for a long period of time depends on its earning capacity. Earning capacity plays an essential role in leverage decision. In general the profitable companies are able to tolerate high level of debt, by virtue of their ability to meet the financial obligations on time. The profit earning companies can easily add more debt in their capital structure. In this backdrop, the study makes an attempt to examine the impact of leverage on profitability for the period 1995-96 to 2009-10. A panel data approach has been applied to analyse the data. The study reveals that the leverage has a significant influence on profitability.