Question:Is financing policy of the Hero Honda motors satisfactory? How is unlevered capital structureof the firm justified?

It is not always advisable to have

zero debts in the company but some time it is important to havedebts. Many business owners focus a lot of their efforts on increasing sales to achieve profitability

andgrowth, but unfortunately often neglect to monitor their cash flow situation as carefully.A debt is good if it helps in bridging this companys cash

needs and supporting its sales and profitability. Ac cording to the case Financing policy of the hero Honda Motors is satisfactory as company has been

adebt free for the five year (2001 to 2005)which is interest free and has no holding cost and company ismeeting its financing needs from its internal sources of

financing.Most important ratio are capital structure ratio also known as leverage ratio, they indicate how the assetsof the firm are funded in other words types of the

liability used to finance assets. in the year 2011 becauseof the speculation of the Hero and Honda hero need to purchase their own assets and because of thisreason their debt-

equity ratio is also increase drastically which is shown as below