An investigation of liquidity and profitability trade off in selected pharmaceutical companies in India

Liquidity management and profitability are significant issues in the growth and survival of business and the ability to handle the trade-off between the two a source of concern for financial managers. The present study is intended to finding the effect of changes in liquidity ratios on profitability of Pharmaceutical companies in India. The study period covers 15 years between 2001 and 2015. Regression analysis was used in the analysis and findings suggest that there is a significant impact exists between liquidity and profitability among the Pharmaceutical companies in India. The study is aimed at discovering the specific factors that are useful in enhancing the profitability and liquidity position of the companies. This empirical investigation using regression analysis reveal that liquidity ratios measure by Current Ratio, Quick Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio, Working Capital Turnover Ratio, Total Assets Turnover Ratio and Debt Equity Ratio have a relationship with profitability measured by return on capital employed (ROCE). Also the liquidity ratios has significant impact on return on profitability of the all the selected Pharmaceutical companies selected for the study.