The impact of financial leverage and debt ratios in comparison on the future returns on equity

The issue of how to finance has caused extensive research in the area of finance and accounting. Despite the extent of funding, managers have to be aware about how to finance and the effects of applying each of its operating performance on profitability and future stock returns of the company. Therefore, in this study, financial leverage and debt financing effect is studied in comparison on the future returns on equity of 80 companies listed in Tehran Stock Exchange and continuously active from 2007 to 2013. The data collection process has been devised by Tadbir Pardazesh database software. The present paper, the method and the nature of the study is cross - correlation. The positive relation has been found between financial leverage and ratio of debt with equity future returns of firms. The study aimed to determine the variables relationship. Source of research data collection included the financial statements and resolutions of the ordinary and extraordinary general meetings of the Company.The instruments used for data collection included observation, statistical analysis, databases, spss and Excel software. The findings of this study, in addition to filling the gap in this field of research are useful for managers and investors.

Keywords:

financial ratios , leverage ratios , debt to operating leverage , market value ratios , return on common shareholders equity