Capital structure analysis of public listed property and real estate in Indonesia: a comparison study of entities in the same industry category
Financial Leverage has always been a powerful tool in developing a business as it gives a firm the power to go outside its production line and try to seize that extra cash. As the primary objective of firms is to obtain maximum profit, financial leverage becomes very attractive for companies? decision makers. However, financial leverage is just like a coin. In one side it offers wealth, in the other side it can bring you down as it comes with a cost. Thereby, in order to find the right proportion of capital structure, this thesis will analyze the correlation between capital structure and company?s RoE so that risks of financial leverage can be reduced to minimum. The findings obtained are actually surprising, as in the study it was proven that financial leverage actually doesn?t increase the profitability of a company.
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