FINANCIAL LEVERAGE IMPACT ON RETURN ON EQUITY FOR ROMANIAN LISTED COMPANIES

Abstract

The aim of this paper is to study the impact of financial leverage on return on equity for a sample of eight Romanian listed companies’ acting in the manufacturing dairy products sector, using financial leverage method. This method was applied for a period of 3 years (2010-2012) and reflects also the influence of debt policy on company’s return on equity that was determined using both accounting data and financial leverage. The conclusions that emerge in this study reflect that financial leverage effect is a key factor that influences the return on equity in function of degree of debts and the relation between return on assets and interest rate, but there are many other determinants of return on equity that are not linked by financial structure.