Working capital, profit and profitability: An absolute and relational study of selected leading indian pharmaceutical firms

The working capital of the business organization is the excess of current assets over current liabilities. The working capital (WC) governs sales of the business organization directly while sales define the profits. Working capital activates the fixed resources and utilizes the factors of production and it is a bases for the production of goods and services. Working capital is the factor that plays a vital role in the enhancement of sales turnover and profits, ultimately. The present study considers and covers the financial data of selected Indian pharmaceutical companies for the period 2013-2018 for the study of the impact of profitability of the working capital on sales and profits. Ratio analysis is the base of the study while some statistical techniques are to be used to get the mutual relationship, trend, and comovement of the WC and sales, earnings before interest, depreciation, and tax (EBIDT), profit before tax (PBT), and profit after tax (PAT) of the selected Indian pharmaceutical companies. The combined inferences of the absolute and relational study explain that the WC governs the profit positively but not proportionately. There is a need to control the indirect expenses or non-manufacturing expenses of the business to enhance the profitability corresponding to WC movement.