Quantifying Profitability through Financial Ratio Analysis: Bangladeshi Pharmaceuticals Industry

Mohammad Fahad Noor, Rejwana Binte Jahir

Abstract


Pharmaceuticals industry in Bangladesh has some divergent features from other countries as it emphasizes very less on research and developments. Mainly companies imports significant amount of raw materials and medicines and export its products to foreign countries. Based on this, profitability of this sector has been measured. Assigning and the application of appropriate financial ratios directly affects the decision making process for the management of the firm, or parties outside the firm. Various literatures have documented an existence of significant relationship between financial ratios and firms profitability through numerous ratio analysis. On this background, the purpose of this study is to observe the relationship between financial ratio analysis and profitability of Pharmaceuticals Industry in the context of Bangladesh for the period of 2004-2013. To find out the relationship between variables, descriptive and multiple regressions analysis has been performed. To generate more income for the company, management should utilize its asset more efficiently. From the theoretical perspective this research has broaden the literature in the field of financial ratio analysis and firm profitability in the context of developing country. The findings of this study will act in the favour of Pharmaceuticals Companies to identify the proper utilization of inventory, debtors’, creditors’ and total assets. The findings of this study might not be generalized for other developing and emerging countries as the study was conducted in Bangladesh only.

Aus. J. Acc. Eco. Fin. Vol 1(1), October 2015, P 41-55


Keywords


profitability; pharmaceuticals; ratio analysis; descriptive analysis; multiple regressions; asset turnover

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