The Influence of Financial Leverage to the Profitability of the Selected Manufacturing Firms Within Metro Manila / De Guzman Judith Anne D.; Castillo, Joan Paul D.; Corsame, Blessy Marie L.; Cruz, Jason Anthony M.; Deniega, Kendrex S.; De Guzman, Ma. Cristina, Eustaquio, Kamille Joy Z.; Faustino, Melvina Criscelle B.; Frias, Richer Grace C.; Gagui. Kolyn M. and Pablo, Carla Me S. 6

Research Paper: (BSBA major in Finance and Treasury Management) - Pamantasan ng Lungsod ng Maynila, 2015. 56

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ABSTRACT: This study pertains to the influence of financial leverage on the profitability of the selected manufacturing firms with Metro Manila using the profitability and efficiency ratios to measure such effect. The use of borrowed funds along with preferred and equity capital is known as leverage. The financial leverage is a prerequisite for achieving optimal capital structure. An optimal capital structure can influence the value of firm and wealth of shareholder's through reduced cost of capital. Hence, determination of optimal debt level and its impact on the firm's over all capital structure is regarded as an integral part of a firm's financial decision. This study aims to determine the influence of financial leverage to the profitability of the manufacturing firms within Metro Manila. Descriptive method was used as a research design for the study. For the instrumentation, the researchers used a guide-type questionnaire which is subjected to a survey involving quantified and qualified data. As for the main instrument, the researchers gather and analyse their financial statements. The locale of the study is within Metro Manila. The sample of the study is considered of the manufacturing firms within Metro Manila and their respective financial managers were the respondents of this study. As for the statistical treatment, the researchers used Frequency Distribution, Percentage Frequency Distribution, Ranking Distribution, Arithmetic Mean or Average, Likert Scale, Profitability Ratios such as: ROA, ROE and Profit Margin, Efficiency Ratios such as Asset Turnover Ratio and Regression Analysis. Generally, the use of financial leverage does not influence the profitability of the selected manufacturing firms within Metro Manila. The results of the test showed insignificant relationship on the level of financial leverage used by the presented entities and its profitability as illustrated by the correlation tables presented in the previous chapter. In corporeal, the presence of debt is considered as one of the threats that one entity can encounter. It can either make one entity to grow or decline. Before incurring debt, everyone must know the possible effects of debt. The risks involved in relation to financial leverage must be understood by the entity to obtain a well-managed financial performance in such a way that the entity will have a profitable operation.

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