International Journal of Management (IJM) Volume 11, Issue 7, July 2020, pp. 531-543, Article ID: IJM_11_07_049 Available online at http://iaeme.com/Home/issue/IJM?Volume=11&Issue=7 ISSN Print: 0976-6502 and ISSN Online: 0976-6510 DOI: 10.34218/IJM.11.7.2020.049

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A COMPARATIVE STUDY ON THE FINANCIAL PERFORMANCE OF THE SELECTED INDIAN PHARMACEUTICAL COMPANIES

Monalisa Mohanty MBA Student, Symbiosis Institute of Management Studies, A Constituent of Symbiosis International (Deemed University) Pune,

ABSTRACT The motive of this paper is to compare the financial performance of the selected pharmaceutical organizations. The financial performance is analysed using Ratio analysis as well as statistical techniques to interpret the data. These data are extracted and calculated using the financial statement of the selected companies for the period of 5 years from 2015 to 2019. Findings reveal that Pharmaceuticals companies are highly liquid and solvent but showed an inconsistency in generating profits and efficiency. The study used recent literature to explore the gap in the existing literature. This study will be useful for regulators, financial analysts and managers concerned about the financial performance of the selected Indian pharmaceutical companies. It is considered a battery for further research in this area. JEL Classification Code: M410 Key words: Financial ratio analysis. Liquidity, Profitability, Solvency, Pharmaceutical firms, Statistical tools Cite this Article: Monalisa Mohanty, A Comparative Study on the Financial Performance of the Selected Indian Pharmaceutical Companies, International Journal of Management, 11(7), 2020, pp. 531-543. http://iaeme.com/Home/issue/IJM?Volume=11&Issue=7

1. INTRODUCTION Ratios analysis was present from a very long time and its use in the study of the features and characteristics of ratios in early period was the key cause for the expansion in the analysis of ratios (Horrigan, 1968). This has been used recently as a common method for the study of the financial statements. Financial performance of an organisation can be determined with the assistance of financial ratios. Through utilizing financial ratios, organisations can decide financial quality or shortcomings just as per circumstances in the market or industry. Financial ratios can give the real image of the company’s financial position. These ratios can help the analysts to get

http://iaeme.com/Home/journal/IJM 531 [email protected] A Comparative Study on the Financial Performance of the Selected Indian Pharmaceutical Companies real ideas about the financial condition of an organization. Data from various financial statements are taken and then ratios are calculated. Financial ratios can tell the financial specialist the future performance of firms by looking at the past patterns. Ratios can help the stakeholders to act in such a way so that they will make high return with less risk involvement. Balance sheet, Income statement and cashflow statement gives an endless sum of information with respect to the monetary state of an organisation. This information is then clarified by the analysis of financial ratio to dissect the company’s execution and money related state. Financial ratios allow differentiation between the monetary achievement and its competitors. There is an endless number of financial proportions which can be utilized to compare. (McKinsey&Company, 2020) Indian pharma 2020, the Indian pharmaceuticals market has attributes that make it remarkable. To start with, branded generics dominate, compensating for 70 to 80 percent of the retail advertise. Second, local players have stayed in a dominant position driven by definition advancement abilities and early ventures. Third, price levels are low which are determined by extraordinary rivalry. While India positions tenth globally in terms of value, it is positioned third in volumes. These characteristics present their own opportunities and difficulties. From a market size of USD 12.6 billion in 2009, the Indian pharmaceutical market will develop to USD 55 billion by 2020, with the possibility to reach USD 70 billion in an aggressive growth situation. In a pessimistic situation portrayed by administrative controls and financial log jam, the market will be discouraged and is expected to reach USD 35 billion. Keeping in view the importance of the sector, we undertake a study of the financial performance of the key players in the sector. Our goal is to compare the financial performance of two highest revenue earning Indian pharmaceuticals companies based on various financial ratios.

2. LITERATURE REVIEW (Beaver, 1966) stated in the study that financial ratios can help in getting important information about a firm. It can be used to detect financial illness of a company even before the failure occurred. The study also state that ratios can also be used to understand the credit worthiness of its borrowers. (Altman, 1968) used ratio evaluation as an analytical device to predict the corporate financial ruin. He took a sample of 33 companies the ones have declare bankruptcy in a route of 1946-1965 and paired them with 33 manufacturing firm that have no longer declared financial disaster. Only one-year financial assertion was enough for analysing the massive corporations. Few ratios have been decided on for discriminant equation such as income with total property, retained earnings earlier than interest and taxes with overall assets, running capital with general assets and market fee of equity with book value of overall debt. Out of those 66 firm, the characteristic was able to predict that there was a 79-percentage threat of detecting failure before one year. (Edmister, 1972) later extended this study by using financial ratios for small business failure prediction. However, the small business failed to predict bankruptcy when only one financial statement is present. He winded up by saying that consecutive three years’ annual reports along with the monetary statements are wanted to evaluate the micro business. (Tan, Koh & Low, 1997) in their research to analyse the solidity of financial ratios throughout the industry used a total of 2618 observations across six industries. The companies that were included in the research were listed in Singapore stock exchange. A total

http://iaeme.com/Home/journal/IJM 532 [email protected] Monalisa Mohanty of 26 financial ratios were used. The study concluded that financial ratios are industries specific and industry benchmark should be used to gauge the company placement and achievement rather than using economic wide benchmarks. Evaluation of monetary ratios of any sector is a way to take a look at the financial state of the sector or industry (Öcal, Oral, Erdis, & Vural, 2005). The study states that there are many key monetary proportions which can be essential than others. By doing factor analysis at the collected monetary facts of Turkish industry as much as length of 5 years, the study concluded that there are five independent factors which consists if financial ratios that degree cash availability, fund structure and money related benefits, pastime regulation, income and profit and boom and assets shape of groups and proved to be touchy to financial changes in the country. Another study (Mahajan & Sarkar, 2007) compared the monetary achievements of Multinational corporations in the motorcar area with Indian Company. In the observe three Indian corporations and MNCs were examined. To analyse the performance a total of ten ratios were taken which measures the cash availability, ability to generate profits and finding the proportion of various sources of funds of the company. The averages of those ratios are compared to look at the performance of the businesses. Their coefficient of variance is measured to evaluate the variability of the Indian businesses and MNCs and regression is calculated for each ratio to decide the significance. Another study by (Maricia and Georgeta, 2012) additionally used monetary ratios to analyse the enterprise failure risk. In this study a total of 63 corporations that have been listed on BSE were taken as a sample and they had been categorised under two head i.e. performing corporations and non- performing companies primarily based on their internet income. The study found out that there is existence of a few difference with profit and yield, monetary placement, liabilities and resource shape also with an advancement of duet years. (Dlen, Kuzey and Uyar, 2013) also used financial ratios for measuring firm performance through a decision tree approach. The sample consist of 2345 public companies of Turkey. A total time period of 2005 to 2011 was covered. A complete set of 31 financial ratios were covered. The study concluded that Earning earlier than Tax to Equity Ratio, the Net earnings Margin, the leverage ratio and the Sales Growth ratio are the major financial ratios. Overall, these results have important association for companies. Stakeholders like investors, analysts, regulators, standard-settlers and stakeholders are mostly focused in comparing the financial ratio of the manufacturing firm than a non- manufacturing firm (Liu, O’Farrell, Wei and Yao. 2013). In their study they used financial ratio to compare the Chinese and Japanese firms. A sample of 15 Chinese firms from five manufacturing industries were taken. Similarly matched 75 Japanese firms were also taken. The result suggested that financial ratios are not enough to directly compare one country with another. Several other external factors like various standards of accounting, and majorly, work customs, ethnic and profitable environments should be taken into consideration. A study was carried out on comparing the achievement of pre- and post- merger of the chemical corporation named LyondellBasell Industries by (Borhan, Mohamed and Azmi, 2014). The financial statements from 2004 to 2011 is collected. It concluded that ratios that evaluate the cash availability, profit generation and capital structure have an effect on the enterprise’s economic performance. Net profit margin (profitability ratio) is the major element for the organisation’s monetary performance observed by Debt ratio (leverage ratio) and current ratio (liquidity ratio). And all these elements have optimistic association with the business enterprise’s financial performance. (Malichova and Durisova, 2015) evaluated financial performances of almost 1000 enterprises operating in IT sector in Slovak republic using financial indicators such as

http://iaeme.com/Home/journal/IJM 533 [email protected] A Comparative Study on the Financial Performance of the Selected Indian Pharmaceutical Companies profitability ratios. liquidity ratios, Total asset turnover ratios and indebtedness indicators. As per the study these indicators are served to identify strengths and weaknesses of performance of enterprises. (Kanapickienė and Grundienė, 2015) in their study to develop a model that detect deception in financial statement also used monetary ratios. Ratios like Liquidity, activity, profitability, solvency and Structure can suggest the presence of deception in financial statements. (Pech, Noguera and White, 2015) in their study stated that equity analysts preferred ratios which are mostly not covered in the textbooks. Ratios like net debt to EBITDA and Net debt to equity are major debt management ratio that are favour by experts but are not majorly mentioned in the textbooks. The reason being net debt are mostly used by professionals than professors and mentors. Another study by (Huang and Wang, 2017) deal with the data analytics framework for key financial ratios. A total of 198 creditworthy companies and 99 less creditworthy companies of United States are taken into observations. 40 financial ratios are computed which were grouped into 7 financial factors that talks about inflow and outflow of cash, profit generation, cash availability, repayments of debt, operating, leverage and owners’ benefit factors. The study concluded that ratios like cost of goods sold by sales, Operating activities net cashflow by Net Income, Long term debt by Total asset along as well as EBIT by (EBIT less expense) are the major handy financial ratios that can be properly separate between the reliable and less reliable organisations. Ratios like financial leverage ratio plays an important role in predicting stock prices (Pražák and Stavárek, 2018). In their study they concluded that there exists a Pearson’s correlative relationship between the stock technique of businesses and ratios like debt fairness ratio, economic leverage, return on fairness and go back on investment ratio. A study on China telecom industry done by (Mbona and Yusheng, 2019) says that a simple fusion of 12 proportion or ratios can effectively analyse the operations of a company and can give a meaningful comparison instead of analysing too many ratios which are costly in nature. Ratios which talks about profit generation, cash availability, growth and valuation proportions and administration efficiency proportions are basically the important performance highlighters for any industry. Due to the correlation between these ratios, instead of looking towards this information individually, they have to be combined together to estimate the achievement of an industry or the organisation. (Ghecham and Salih, 2019) In their study to recognize the overall achievement of the traditional and Muslim banks which can be running in Gulf Cooperation Council Countries. A fact of forty-six banks were taken and their monetary ratios are drawn. These ratios cover a very big time period. Five different economic ratios that evaluates the efficiency of assets and equity, cash availability, debt repayment capacity and productivity are used to assess the overall performance of those banks. Monetary ratios are prominently used to comparatively analyse the economic achievement of Hungarian and Romanian retail meals micro business (Fenyves, Zsido, Bircea, Tarnoczi, 2019). They stated that the profitability of Hungry is slightly better than Romania by finding ROS, ROA and ROE of firms from Hajdu-Bihar county (Hungry) and Cluj county (Romania). The liquidity of most of the retail companies is worse in both of these countries which they came to know while finding the Current ratio and Average Quick ratio. As per the monetary ratio they finally concluded that the monetary productivity of the retail food companies of the duo countries have to be improved to sustain for an extended period of time

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Another study on Romanian sector have also used several financial ratio as financial indicators (Bunea, Corbos, Popescu, 2019). As in keeping with their result, ratios like asset turnover ratio, price of share to book value of share ratio and monetary leverage are the important ratios to discover Return on equity, escorted by the sign that asset turnover and price to income had most powerful impact. (Farhan, Alhomidi, Almaqtari and Tabash, 2019) in their study observe the effect of ratios like current ratio and liquidity ratio on the economic overall performance of Indian pharmaceuticals groups. They additionally try and find out whether or not the corporate governance moderates the connection among liquidity ratios and firm’s performance. They took the records of a sample of 82 pharma firms for a time span of 10 years. Results found out that there exist a nice and giant effect of contemporary ratio and short ratio on the pharmaceuticals groups’ economic performance. It additionally said that company governance moderates the connection between present day ratio, short ratio and internet running margin. The paper additionally mentions that Indian pharmaceuticals corporations are efficiently handling their liquidity. Another study by (Yameen, Farhan and Tabash, 2019) talks about the association between cash availability and profit generation. It is found that contemporary liquidity ratio, quick ratio has an optimistic impact on profitability of Indian pharmaceutical sector while leverage, firms’ length and age have a pessimistic impact at the profitability of pharmaceutical companies. (Rajender, 2020) additionally calculated ratios like running profit, gross profit, internet profit, yield on assets and yield on equity to discover the profit generation capability of Paint corporations of India. They took a sample of three paint companies. Further the study also calculated mean and coefficient of variance. It concluded that profitability position of the Indian paint companies is good and satisfactory. In 2005 an act was passed which talks about the amendment of the previous patent act have initiated the Patent in products India. However, product patent regime has negligible impact on productivity of Indian Pharmaceutical companies (Mahajan, 2020). Judicious utilization of resources and technological changes have a great role in increasing the productivity and improving positive role in the growth of productivity and improving achievement.

3. RESEARCH OBJECTIVE The main objective of this study is to compare the financial performance of two selected companies. The specific objectives are to compare:  The short-term debt paying potentiality of the selected companies through current ratios  The company’s capital structure, monetary obligations and its proficiency to pay back the obligation through leverage ratios  The profit generating power of the selected companies by using profitability ratios  The efficiency of the selected companies through activity ratios

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4. RESEARCH METHODOLOGY 4.1. Data and Sample Selection The data used in the study are secondary data that are extracted from the monetary statements and annual reports of the respective companies. The sample for the study is top two Indian Pharmaceuticals companies that are:  Sun Pharmaceuticals Industries Ltd.  Ltd. The selection is based on their net sales. These companies have highest net sales among all other Indian Pharmaceuticals companies. The study covers a time span of five years (2015- 2019). To compare the financial position of the companies, to analyze the data and to draw conclusions financial ratios are used as variables. These variables are taken out from the monetary statements of these companies over the above-mentioned period. Further a comprehensive analysis is carried by applying statistical tools such as mean, standard deviation and coefficient of the variation. In this study, we initiate with eight variables that are grouped into four major categories namely liquidity factor, leverage factor, profitability factor and activity factor.

4.2. Variables Description

Table 1 Variables Category Formula Description Current Ratio Liquidity factor Current Assets It tells about the company’s capacity divided by Current to pay off the short-term debt by Liability using the current assets. Quick Ratio Liquidity factor Liquid Assets divided It tells about the company’s capacity by Current Liability to use the cash and cash equivalent Total Debt to Leverage factor Total Debt divided by It tells about the proportion of fund Equity Ratio Shareholder’s equity finance by the shareholders and creditors. Interest Coverage Leverage factor Earning before It tells about company’s capacity to Ratio Interest and Tax pay back its interest payments. divided by Interest Expense Return on Equity Profitability Net Income divided It tells about how much return the factor by shareholder’s shareholder will get with respect to equity the equity shares it owns Net Profit Ratio Profitability Net Profit divided by It measures the profitability with factor Net sales respect to the sales. Total Asset Activity factor Net sales divided by It tells us how productivity assets Turnover Ratio average total asset are being used to generate sales. turnover ratio Current Asset Activity factor Net sales divided by It tells us how efficiently the current Turnover Ratio average total asset assets are utilized to produce sales. turnover ratio

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5. ANALYSIS AND DISCUSSION 5.1. Liquidity Factor

Table 2 Current Ratio CURRENT RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 1.88 2.01 2016 2.28 1.14 2017 1.84 2.59 2018 1.59 2.82 2019 1.79 3.29 MEAN 1.88 2.37 S.D 0.25 0.83 C.V 13% 35%

An ideal current ratio is 2:1. It means that it is ideal for the company to have twice current asset with respective to it current liabilities. From Figure 1, the mean value of the current ratio is (1.88) and (2.37) and coefficient of variation is 13% and 35% for Sun pharmaceuticals and Cipla respectively. It shows that both the firms are highly liquid. Both firms have the capacity to pay off their current liabilities with their present current assets. However, the coefficient of variation is very high in case of Cipla (35%) as compared to (13%) which means that there is a high variation in the values of current ratios of Cipla as compared to Sun pharmaceuticals. Also, the for three consecutive year the current mean value of the current ratio of Cipla were above (2.5:1) which is not very pleasant as the firm is having a lot of unused current assets which could be invested properly. Therefore, the Current ratio of the Sun pharmaceuticals is in much better form as compared to Cipla Industries.

Table 3 Quick Ratio QUICK RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 1.50 0.99 2016 1.77 0.64 2017 1.45 1.54 2018 1.24 1.75 2019 1.33 2.22 MEAN 1.46 1.43 S.D 0.20 0.62 C.V 14% 44%

An ideal Quick ratio is 1:1. It means that company should have an equivalent amount of Quick assets which are marketable securities, trade receivables and cash at hand and bank to pay off your current liabilities. From Figure 2, the mean value of the quick ratio is (1.46) and (1.43) and coefficient of variation is 14% and 44% for Sun pharmaceuticals and Cipla respectively.

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It shows that both the firms have even more quick assets to pay off the current liabilities than actually required. It means both the firms are highly liquid. However, the coefficient of variation is very high in case of Cipla (44%) as compared to Sun pharma (14%) which means that there is high inconsistency in the values of quick ratios of Cipla as compared to Sun pharma. In year 2019-20 the quick ratio was (2.22:1) which means company have a lot of quick asset which it could use rather than keep it as it is. Therefore, the quick ratio of Sun pharmaceuticals is in much better form as compared to Cipla Industries.

5.2. Leverage Factor

Table 4 Total Debt to Equity Ratio TOTAL DEBT TO EQUITY RATIO SUN CIPLA YEARS PHARMACEUTICALS INDIUSTRIES 2015 0.25 0.16 2016 0.22 0.44 2017 0.20 0.32 2018 0.23 0.28 2019 0.22 0.28 MEAN 0.22 0.29 S.D 0.02 0.10 C.V 7% 34%

Total debt to equity ratio tells about financial structure of the firm. It tells about the sources of the funds. Funds can be borrowed which are the Total debt or funds can be owned by the shareholders which is the Equity. Through Debt to equity ratio we can find what proportion of fund are borrowed from creditors and banks with respect to how much fund is owned by the shareholders. There is no ideal number for this ratio. Sourcing funds from both the methods can have its own pros and cons. Pros of having more funds from shareholders is that it is owned so firm may or may not return the money and they may give them dividend only when they earn a good amount of profit. Cons is that having a more funds from shareholders can lead to agency conflicts between shareholders and management and also the cost of equity is very high. Similarly, Pros of having more funds from creditors is that the cost of debt is less as compared to cost of equity. Cons is the problem of solvency. From Figure 3, the mean value of the Total debt to Equity ratio is (0.22) and (0.29) and coefficient of variation is 7% and 35% for Sun Pharmaceuticals and Cipla respectively. It shows that both the firms are sourcing most of their funds through shareholders instead of borrowing it from outside. However, the coefficient of variation is extremely high in case of Cipla (34%) as compared to Sun pharmaceuticals (7%) which means that there is a high variation in the values of Total debt to Equity ratio of Cipla as compared to Sun pharmaceuticals. Therefore, the Total debt to Equity ratio of the Sun pharmaceuticals is in better form as compared to Cipla Industries.

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Table 5 Interest Coverage Ratio INTEREST COVERAGE RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 10.47 9.26 2016 12.87 7.36 2017 21.63 6.67 2018 7.56 14.29 2019 8.05 11.34 MEAN 12.11 9.79 S.D 5.73 3.11 C.V 47% 32%

Interest coverage ratio tells about how regularly a business enterprise can cover its hobby fee with its running income. The decrease the ratios, the more the organization is stressed by way of debt expense. Even though there is no such perfect ratio but whilst a organization’s hobby insurance ratio 1.5 or lower, its potential to meet interest prices may be questionable. From Figure 4, the mean value of the interest coverage is (12.11) and (9.79) and coefficient of variation is 47% and 32% for Sun pharmaceuticals and Cipla respectively. It shows that both the firms have the ability to pay off the interest from the operating income. However, it is seen that throughout the years the interest coverage ratio of Sun pharma has gone down which means that either their operating income is decreasing or their interest payment increasing which is not a good sign. The interest coverage ratio of Cipla is increasing throughout the years which is good sign for the company. Both Sun pharma and Cipla have a high coefficient of variation ratio that is (47%) and (32%) respectively which means that there is high inconsistency in the values of interest coverage ratios. Therefore, the interest coverage ratio of the Cipla Industries is much better form as compared to Sun pharmaceuticals.

5.3. Profitability Factor

Table 6 Return on Equity RETURN ON EQUITY SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 15% 11% 2016 12% 12% 2017 17% 8% 2018 5% 10% 2019 6% 10% MEAN 11% 10% S.D 0.05 0.01 C.V 49% 14%

From Figure 5, the mean value of the return on equity is (11%) and (10%) and coefficient of variation is 49% and 14% for Sun pharmaceuticals and Cipla industries respectively. It is clear that the return on equity of Sun pharma has gone down from year to year. It has recorded the highest (15%) in the year 2015 and since then it has fallen very aggressively. On the other hand, return of equity of Cipla has also gone down for few years but it did go up in past two years. However, the coefficient of variation is extremely high in case of Sun pharma

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(49%) as compared to Cipla (14%) which means that there is a high variation in the values of return of equity ratio of Sun pharma as compared to Cipla Industries. Therefore, the return on equity of Cipla Industries is in better form as compared to Sun pharmaceuticals.

Table 7 Net Profit Ratio NET PROFIT RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 16% 10% 2016 16% 10% 2017 22% 7% 2018 8% 9% 2019 9% 9% MEAN 14% 9% S.D 0.06 0.01 C.V 41% 14%

From Figure 6, the mean value of the net profit ratio is (14%) and (9%) and coefficient of variation is 41% and 14% for Sun pharmaceuticals and Cipla industries respectively. It is clear that the net profit ratio of Sun pharmaceuticals has gone down from year to year. It has recorded the highest profit (22%) in the year 2017 and since then it has fallen very aggressively. On the other hand, net profit ratio of Cipla Industries has also gone down for few years but it did go up in past two years. However, the coefficient of variation is extremely high in case of Sun pharma (41%) as compared to Cipla (14%) which means that there is a high variation in the values of return of equity ratio of Sun pharma as compared to Cipla Industries. Therefore, Sun pharmaceuticals is giving more return but with a high amount of risk whereas Cipla has given less return but with a less amount of risk.

5.4. Activity Factor

Table 8 Total Asset Turnover Ratio TOTAL ASSET TURNOVER RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 0.70 0.78 2016 0.54 0.75 2017 0.54 0.69 2018 0.42 0.69 2019 0.45 0.70 MEAN 0.53 0.72 S.D 0.11 0.04 C.V 20% 6%

From Figure 7, the mean value of the total asset turnover ratio is (0.53) and (0.72) and coefficient of variation is 20% and 6% for Sun pharmaceuticals and Cipla Industries respectively.

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It is obvious that Cipla Industries turns over its belongings at a faster fee than Sun pharmaceuticals. For every rupee in total assets, Cipla Industries generated 0.72 rupees in sales, even as Sun pharmaceuticals generated 0.53 rupees. Both the firms’ turnover may additionally imply that the pharma company are experiencing sluggish income or holding obsolete inventory. They could not be the usage of their property effectively or the fixed assets such as belongings or equipment might be sitting idle or not being utilized to their complete capacity. Both the firm do not have a good asset turnover ratio.

Table 9 Total Current Asset Turnover TOTAL CURRENT ASSET TURNOVER RATIO SUN CIPLA YEARS PHARMACEUTICALS INDUSTRIES 2015 1.16 1.58 2016 0.97 1.68 2017 1.00 1.66 2018 0.82 1.56 2019 0.93 1.41 MEAN 0.98 1.58 S.D 0.13 0.11 C.V 13% 7%

From Figure 8, the mean value of the total current asset turnover ratio is (0.98) and (1.58) and coefficient of variation is 13% and 7% for Sun pharmaceuticals and Cipla Industries respectively. It is clear that Cipla Industries turns over its current assets at a faster rate than Sun pharmaceuticals. For every rupee in current assets, Cipla Industries generated 1.58 rupees in sales, while Sun pharmaceuticals generated 0.98 rupees. Sun pharmaceuticals’ turnover may indicate that the pharma company is not able to efficiently convert its current asset like cash, inventory, account receivables etc. into generating sales. Therefore, Cipla industries have a good current asset turnover ratio with low coefficient of variations as compared to Sun pharmaceuticals.

6. CONCLUSION This study attempts to analyse the financial position of the selected pharmaceuticals companies in India in terms of Liquidity ratios, Leverage ratios, Profitability ratios and Activity ratios. It can be concluded that in terms of liquidity, both the firms are highly liquid. Even though Sun pharmaceuticals have a better current ratio and quick ratio as compared to Cipla Industries but both firms have the capacity to pay off the short-term debt. In case of leverage, both the firms are performing well. Both of the firms have quite same capital structure where most of the funds are sourced through shareholders. The firms also have enough operating income to cover the interest payments that are due. In case of profitability, it is seen that both the firms are not able to generate consistent amount of profits that they use to generate few years before. In case of the efficiency, both the firms are not able to generate enough amount of sales from their total assets. However. Cipla Industries have a better efficiency in generating sales from their current assets. Overall, the Pharmaceuticals companies have a good and satisfactory liquidity and leverage position but they need to work on their Profitability and efficiency position.

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[19] Pražák, T., & Stavárek, D. (2018). Importance of financial ratios for predicting stock price trends: evidence from the Visegrad Group. International Journal of Trade and Global Markets, 11(4), 293-305. [20] Pech, C. O. T., Noguera, M., & White, S. (2015). Financial ratios used by equity analysts in Mexico and stock returns. Contaduríay Administración, 60(3), 578-592. [21] Rajender, D. P. (2020). Performance Evaluation of Select Paint Companies in India. International Journal of Management (IJM), 11(1), 56-60. [22] Salih, A., Ghecham, M. A., & Al‐Barghouthi, S. (2019). The impact of global financial crisis on conventional and Islamic banks in the GCC countries. International Journal of Finance & Economics, 24(3), 1225-1237. [23] Tan, P. M., Koh, H. C., & Low, L. C. (1997). Stability of financial ratios: A study of listed companies in Singapore. Asian Review of Accounting. [24] Yameen, M., Farhan, N. H., & Tabash, M. I. (2019). The Impact of Liquidity on Firms’ Performance: Empirical Investigation from Indian Pharmaceutical Companies. Academic Journal of Interdisciplinary Studies, 8(3), 212-212. [25] Annual reports, FY (2014-19), Sun Pharmaceutical Industries ltd. [26] Annual report, FY (2014-19), Cipla ltd. [27] India Pharma (2020) Propelling access and acceptance, realising true potential, 2020, McKinsey & Company.

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