*Assistant Professor, School of Management Studies, Bannari Amman Institute of Technology, Sathyamangalam, India
**Former Principal and Head, Department of Commerce and Business Administration, Jamal Mohamed College, Trichy, India
Online published on 2 July, 2016.
This empirical study evaluates the relationship between profitability and leverage of selected pharmaceutical companies in India. The study finds that by studying specific industry's leverage, one can ascertain unique attributes, which are usually not apparent in the combined analysis of many sectors. This study has analyzed 30 companies in the pharmaceutical industry, which are selected based on the consistency of the data for the period 2006 – 2015 using statistical tools like Descriptive Statistics, Multiple Correlation and Multiple Regression Analysis. Seven regressors i.e., size, growth rate, long term debt ratio, total debt ratio, tangibility, non-debt tax shield and interest coverage ratio are employed to examine their effects on different profitability indicators such as return on assets, return on equity and earnings per share. The empirical results revealed that independent variables such as, size and total debt ratios have statistically significant relationship with the different proxies of profitability and they determine the profitability to a great extent.
Leverage, Profitability, Pharmaceutical Companies, Total Debt Ratio, Multicollinearity, Multiple Correlations, Multiple Regression Analysis
