This caselet is meant to introduce the participants/students to three types of leverages - Operating Leverage, Financial Leverage and Combined Leverage - and their relationship with the value of the firm. Shreya Rao, the Founder-CEO of Shreya Media & Entertainment Private Limited (SMEPL), was planning to launch two new channels after her success with SMEPL. Then again, she was not sure whether she should go the debt way, the equity way or the balanced way. She was not certain how the firm's value pans out with any of the approaches.

1. SHREYA MEDIA & ENTERTAINMENT PRIVATE LIMITED:
LEVERAGING ON THE LEVERAGE?
This caselet is meant to introduce the participants/students to three types of leverages – Operating Leverage,
Financial Leverage and Combined Leverage – and their relationship with the value of the firm. Shreya Rao, the
Founder-CEO of Shreya Media & Entertainment Private Limited (SMEPL), was planning to launch two new
channels after her success with SMEPL.Then again, she was not sure whether she should go the debt way, the
equity way or the balanced way. She was not certain how the firm’s value pans out with any of the approaches.
Pedagogical Objectives
• To understand the concepts of leverage and its significance in capital structure management
• To examine the concepts of Operating leverage, Financial leverage and Combined leverage and their
impact on the value of the firm
• To analyse various financing options and arrive at the most preferred financial choice
Case Positioning and Setting
This caselet can be used in either of the following courses in an MBA program:
• Financial Management – To understand the concept and implications of Operating Leverage, Financial
Leverage and Combined Leverage on a firm’s value
• Corporate Finance –To understand how the presence of equity, debt and changes thereof would affect a
firm’s capital structure
ABSTRACT
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