Analysis of Financial Performance of Pharmaceutical Companies Using Z Score Model

Abstract

Business units need profit for its existence and for its expansion. They discharge their obligations to the various segments of the society only through earning profits. So the financial performance of the business organizations matters a lot for all its stakeholders. The interested parties are very much concerned about is there any improvement in profitability and whether thereis efficiency in returns, etc. An analysis of the performance of the business will help to assess the financial stability of such business. Financial performance analysis refers to the process ofdetermining financial strength and weakness of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account. In this the researchers have attempted to analyze the financial performance of Indian pharmaceutical companies by using Z score model. The study concludes that the overall financial health of pharmaceutical industry is in healthy zone. Because from the eight selected companies, five companies (Divis Laboratories Ltd., Aurobindo Pharma Ltd., Cipla Ltd., Dr.Reddy’s Laboratories Ltd. and Cadila Healthcare Ltd.) are in healthy zone. Only three companies (Piramal Enterprises Ltd., Sun Pharma Industries Ltd. and Glenmark Pharmaceuticals Ltd.) are in bankruptcy zone.