Paper Details

Name: Chaksh Sharma
Country: India

Year: 2025
Volume: Volume-12, Issue-2 (July-December)
Page Number: 264-274
DOI: https://doi.org/10.5281/zenodo.18183622

ABSTRACT
The primary aim of this study is to examine the effect of leverage on risk exposure and
financial performance of Small and Medium Enterprises (SMEs) and commercial sector firms operating in Ludhiana. Leverage is analyzed through three dimensions, namely Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL), and Degree of Total Leverage (DTL), which serve as the independent variables of the study. Financial
performance and risk are measured using Return on Equity (ROE), Return on Assets (ROA), Return on Sales (ROS), Gross Margin (GM), and risk represented by variability in returns. Sales growth is incorporated as a control variable to account for firm-level expansion effects. The analysis is based on a three-year period covering 2021 to 2024, with a sample of 61 SMEs and commercial organizations located in Ludhiana. The study relies on secondary data obtained from financial statements and related records. Statistical analysis is carried out using SPSS version 20, and linear regression techniques are applied to assess the significance of relationships between leverage measures and performance indicators. The scope of this research is confined to SMEs and commercial sector firms in Ludhiana; therefore, the findings may not be generalized to other industries or regions. The study offers original empirical evidence by focusing specifically on leverage-related dynamics within SMEs and commercial enterprises in this important industrial city.