Impact of Financial Leverage on Firm’s Investment in Listed Hotels and Travels Companies in Sri Lanka

Abstract

Leverage is a technique magnifies gain and loss.  High leverage may be beneficial in boom periods; it may cause serious cash flow problems in recessionary periods.  So this research study examines the impact of financial leverage on firm’s investment using information on ten Hostels and travel companies listed on Colombo stock Exchange over the period of 2009-2013. Random sampling is used for data collection. Analyzed results revealed that gross investment had significant impact on debt to equity at 0.01 significant levels. But fixed investment had not significant impact on debt to equity. Further it implies There is positive significant relationship between gross investment and debt to equity .r value indicates the .552 level of Strength at the 0.01 significant level and there is negative relationship between fixed investment and debt to equity But there is no significant relationship exist (p>0.05).