A COMPARATIVE STUDY ON WORKING CAPITAL MANAGEMENT OF SELECTED PHARMACEUTICAL COMPANIES OF INDIA Ayub Ahamed K S Assistant professor, school of art of management science RAI TECHNOLOGY MANAGEMENT ABSTRACT Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them. This paper tries to make an attempt to compare the working capital performance of the top pharmaceutical companies in India i.e. SUN PHARMACY CEUTICAL INDUSTRIES LIMITED, DR. REDDY'S LABORATORIES, LUPIN LIMITED and CIPLALIMITED, for the 5 years from the financial year of 2012 to 2016, whereas working capital is important concept if the firm cannot maintain a satisfactory level, it is likely to became insolvent and may even be forced into bankruptcy of the companies. KEY WORDS: Working capital, operating cycle, size-wise analysis 1. INTRODUCTION Working capital management is refers to a company s managerial accounting strategy designed to monitor and utilize the two component of working capital, current asset and current liabilities, to ensure the most financially efficient operation of the company. The primary function of working capital management is to make sure the companies always maintain sufficient cash flow to meet its short-term operating cost and short-term obligations. Current assets: refer to those assets which in ordinary course of business can be, or will be, converted into cash within one year without undergoing a step-down in value and without disturbing the operation of the firm. Some of the example of current assets are cash, marketable securities, account receivable, inventory etc., 27
Current liabilities: are those liabilities which are intended, at their inspection, to be paid in the ordinary course of business, within a year, out of the current assets or earning of the concern. Some of example of current liabilities are account payable, bills payable, bank overdraft, outstanding expenses etc, There are two concept of working capital: a. Gross working capital: also referred to as working capital, means the total current assets. b. Net working capital: can be defined in two ways (i) the most common definition of NWC is the difference between current assets and current liabilities (ii) alternative definition of NWC is that portion of current assets which is financed with long term funds. BRIEF INTRODUCTION OF SELECTED COMPANIES: 1. Cipla ltd was established in the year 1935 in the name of The chemical industrial and pharmaceutical laboratories on August 17 1935. The company was registered as a public sector Ltd co., with a authorized capital of Rs 6 lakhs. Ciplawas officially opened on September 22 1937 when the first products are ready for the market. In 1942, the co., blue print for research institution was accepted by the government of India and led to the birth of the council of scientific industrial research (CSIR) which is today an apex research body in India. 2. Dr.Reddy s laboratory is a 32 years old company carting tom the need of the pharmaceutical sector. Dr.Reddy s started its operation in 1984 in the active pharmaceutical ingredients (API) segment with a single drug in 60 tone facility near Hyderabad. In 1986 it s shipped its first consignment of methyldopa drug to west Germany. 3. Sun Pharmaceutical was established by Mr.Dilip Shanganvi in 1983 in vapi with five products to treat psychiatry ailment. Cardiology products were introduced in 1987 followed by gastro logy products in 1987. Today it is the largest chronic prescription company in India and market leader. In the 2014 it acquisition of Ranbaxy will make the company the largest pharmacy company in India, and US and the 5 th largest specialty generic company in globally 4. Lupin Ltd was founded in 1968. It is a transnational pharmaceutical company based in Mumbai. It is seventh largest company by market capitalization and the 10 th largest generic pharmaceutical company by revenue globally. Lupin is the fifth largest 28
generic pharmaceutical company in the US by prescription led market share and 3 rd largest Indian pharmaceutical company by revenue. It has the distinction of being the fastest growing generic pharmaceutical player in US and Japan and is the 4 th largest and the fastest growing pharmaceutical player in South Africa. Review of literature 1. Mohan, Reddy P. (1991), examined the various aspects relating to working capital management among six selected largescale private companies in Andhra Pradesh from 1977 to 1986. The study revealed that the investment in current assets in the selected companies were more than that of fixed assets. 2. Patel and Parjapati (2012) analyzed five steel companies to know the comparative position and uses of working capital. Various analyses such as ratio analysis and operating cycle analysis have been used. The study reveals that Tata steel ltd has highest growth of net working capital during holding period followed by Jindal steel ltd & it is negative with JSW steel.. Net operating cycle of Jindal steel and Tata steel is negative in each year that shows there is a very good working capital management in these companies. 3. Bhunia and Khan (2011) analyzed the liquidity management efficiency of Indian steel company. Data has been taken from 230 steel companies from CMIE database, over the period of 2002 to 2010. It was concluded that liquidity and profitable position is good and satisfactory of the company. 4. Solano et. al (2007) reviewed the effect of working capital management on SME profitability. To achieve the objective 8872 small to medium sized companies have been taken for the period over 1996-2002. Panel data methodology has been adopted and found that if cash conversion cycle will small it will help in improve the firm profitability. So, the managers of the firm should try to reduce their inventories and the number of days for which their accounts are outstanding. 5. Vedavinayagam Ganesan (2007) and the title of his research was An Analysis of working capital management efficiency in telecommunication equipment industry in this research he took 349 telecommunication equipment companies as sample and covering the period 2001-2007 and for the research he adopted the method of Anova,correlation and regression analyses. The conclusion of his research was that days working capital negatively affect firms profitability. 29
6. B. Bagchi, B Khamrui and the title of their study was relationship between working capital management and profitability: A study of selected FMCG companies in India. in this research they have selected ten FMCG companies from India and covered data from 2000-2001 to 2009-2010. For the analysis they have adopted The method of correlation multiple regression analysis and t test. After following all the method they have conclude that among these companies there was absent of positive relationship between firms profitability and variables of the working capital management. 7. Kesseven Padachi (2006) has undertaken a study on trends in working capital management and its impact on firms performance by analyzing mauritian small manufacturing firms. The study was undertaken by taking data from 1998-2003 for 58 firms. The key variables used in the analysis were inventory days, accounts receivable days, accounts payable days and cash conversion cycle. A strong significant relationship between working capital management and profitability has been found in previous empirical work. An analysis of the liquidity, profitability and operational efficiency of the five industries shows significant changes and how best practices in the paper industry have contributed to performance. 8. Swaran Singh & S.K.bansal (2010) had done a comparative study on management of working capital in IFFCO & KRIBHCO. The study was done by taking data for the year 1999-00 to till 2006-07. The study was done using various analytical tools such as ratio analysis, operating cycleanalysis & T-Test. The study has finally concluded that management of working capital at IFFCO is better as compare to KRIBHCO. 9. Shanmugam, R. and Poornima, S. (2001), showed that the effective management of working capital is still most crucial in organizations success for 28 medium and large scale spinning mills in Coimbatore in the state of Tamil Nadu. 10. Dutta, Sukamal (1995), evaluated the working capital crisis and working capital management requirements of selected paper mills of West Bengal during the period 1983-84 to 1985-86. The study concluded that the overall financial conditions of 40% of the firms were assumed to be precarious. 11. Research methodology: The research methodology is one of the significant concepts in any research study. In research the expressive or descriptive research for describing the study and its deals with staticstic data and main aim of report is to describe the factor affecting in making compare between 5 different companies Sun Pharmacy ceutical industries limited, Dr. reddy's laboratories, Lupin limited and Ciplalimited, pharmaceutical and their performance in the view of working capital. The study is done on basis of data for the period of 5 years from 30
the financial year 2012-2016 the secondary mainly collected from the sources of internet like companies and money control.com websites. The analysis of working capital management of selected companies is arranged in the following parts: 1. Size-wise analysis. 2. Ratio analysis. 3. Operating cycle analysis. Objectives of the study: 1. To examine the working capital performance of the selected companies. 2. To examine the liquidity position of selected companies. 3. To suggest the selected companies for better performance regards to working capital. 31
Table 1: size wise analysis of working capital components of CIPLALTD % OF % OF CASH BANK BALANCE % OF LOANS ADVANCES % OF TOTAL CURRENT LIABALITIES PROVISION NET WORKIN CAPITA SUNDRY TOTAL YEAR INVENTORIES DEBTORS 2012 1824.5 39.56 1519.31 32.94 55.06 1.19 1213.66 26.31 4612.53 1431.31 3181.22 2013 2343.37 45.74 1645.22 32.12 105.07 2.05 1029.1 20.09 5122.76 1657.88 3464.88 2014 2511.16 46.20 1728.1 31.79 46.04 0.85 1150.69 21.17 5435.99 1955.02 3480.97 2015 3289.2 48.40 2058.91 30.29 62.7 0.92 1385.52 20.39 6796.33 2721.06 4075.27 2016 2918.47 43.14 1898.74 28.06 53.01 0.78 1895.49 28.02 6765.71 2548.36 4217.35 MEAN 2577.34 44.85 1770.056 30.80 64.376 1.12 1334.892 23.23 5746.664 2062.726 3683.938 MIN 1824.5 41.29 1519.31 34.38 46.04 1.04 1029.1 23.29 4418.95 1431.31 2987.64 MAX 3289.2 44.76 2058.91 28.02 105.07 1.43 1895.49 25.79 7348.67 2721.06 4627.61 INTERENCE: Inventory holds major portion in total assets of Ciplaltd. It is good sing of the organization and growing sales. On an a inventory holds 44.85% in total current assets, sundry debtors and cash and bank balance hold 30.80% & 1.12% portion respectively. Loa advances holding 23.23% portion in total current assets. Total current assets was of Rs 5746.66, on an average where total current liabiliti provision were of Rs, 2062.72 and net working capital was of Rs.2062.72. 32
Table 2: size wise analysis of working capital components of DR REDDY LABS SUNDRY DEBTOR S CASH BANK BALAN CE LOAN S ADVA NCES TOTA L TOTAL CURRENT LIABALITIES PROVISION NET WORKING CAPITAL YEA INVENTO % OF % OF % OF % OF R RIES 2012 1326.7 24.81 1943.5 36.34 849 15.87 1229.3 22.98 5348.5 2089.4 3259.1 2013 1526.5 22.45 2963.9 43.59 919.1 13.52 1390.2 20.45 6799.7 2616.6 4183.1 2014 1592.1 19.01 4561.5 54.45 665.1 7.94 1558.5 18.60 8377.2 2514.6 5862.6 2015 1723.3 19.46 4711.7 53.20 901.4 10.18 1519.6 17.16 8856 2697.2 6158.8 2016 1699.6 19.71 3893.5 45.14 1268 14.70 1763.9 20.45 8625 2868.2 5756.8 MEA N 1573.64 20.70 3614.82 47.56 920.52 12.11 1492.3 19.63 7601.2 8 2557.2 5044.08 MIN 1326.7 25.69 1943.5 37.63 665.1 12.88 1229.3 23.80 5164.6 2089.4 3075.2 MAX 1723.3 18.20 4711.7 49.77 1268 13.39 1763.9 18.63 9466.9 2868.2 6598.7 33
INTERENCE: Among all current assets of Dr Reddy labs, sundry debtors holds major portion of 47.56. Inventory holds a portion of 20.70% in total current assets. On an average cash and bank balance and loans and advances are holding 12.11% & 19.63% portion of total current assets respectively. A total current asset was Rs. 7601.28 on an average where as current liabilities were of Rs 2557.20 net working capital was of Rs. 5044.08. Table 3: size wise analysis of working capital components of SUN PHARMACY LTD. CASH BANK BALANCE LOANS ADVANCES TOTAL CURRENT LIABALITIES PROVISION NET WORKING CAPITAL YEAR INVENTORIES % OF SUNDRY DEBTORS % OF % OF % OF TOTAL 2012 640.07 18.46 713.48 20.58 1327.71 38.29 785.99 22.67 3467.25 1212.78 2254.47 2013 868.76 25.22 737.53 21.41 431.21 12.52 1407.71 40.86 3445.21 1414.48 2030.73 2014 918.38 18.10 452.75 8.92 141.48 2.79 3561.03 70.19 5073.64 4020.11 1053.53 2015 2189.25 30.02 1802.82 24.72 416.46 5.71 2885 39.56 7293.53 9236.15-1942.62 2016 2132.16 28.47 2016.81 26.93 169.39 2.26 3170.07 42.33 7488.43 7043.18 445.25 MEAN 1349.724 25.21 1144.678 21.38 497.25 9.29 2361.96 44.12 5353.612 4585.34 768.272 MIN 640.07 31.68 452.75 22.41 141.48 7.00 785.99 38.90 2020.29 1212.78 807.51 MAX 2189.25 24.07 2016.81 22.18 1327.71 14.60 3561.03 39.15 9094.8 9236.15-141.35 INTERENCE: A total current assets of Sun Pharmacy cy ltd, loan and advances holds major portion of 44.12%. Inventory and sundry debtors hold of total current assets of 25.21% and 21.38%in total current assets. Cash and bank balance hold lowest portion of 9.29%. Total current liabilities and provision was 4585.34 and net working capital was 768.27. 34
Table 4: size wise analysis of working capital components of LUPIN ltd. YEAR INVENTORIES % OF SUNDRY DEBTORS % OF CASH BANK BALANCE % OF LOANS ADVANCES % OF TOTAL TOTAL CURRENT LIABALITIES PROVISION NET WORKING CAPITAL 2012 1123.56 32.98 1490.8 43.76 19.2 0.56 773.05 22.69 3406.61 1431.65 1974.96 2013 1330.83 32.43 1874.27 45.67 20.12 0.49 878.7 21.41 4103.92 1643.73 2460.19 2014 1372.24 26.45 2859.92 55.12 146.28 2.82 810.35 15.62 5188.79 1680.52 3508.27 2015 1739.51 34.53 2515.21 49.93 59.3 1.18 723.9 14.37 5037.92 1939.88 3098.04 2016 1913.96 25.50 4546.07 60.56 29.2 0.39 1017.67 13.56 7506.9 2237.44 5269.46 MEAN 1496.02 29.63 2657.254 52.63 54.82 1.09 840.734 16.65 5048.828 1786.644 3262.184 MIN 1123.56 33.46 1490.8 44.40 19.2 0.57 723.9 21.56 3357.46 1431.65 1925.81 MAX 1913.96 25.10 4546.07 59.63 146.28 1.92 1017.67 13.35 7623.98 2237.44 5386.54 INFERENCE: Among all total current assets of Lupin ltd, sundry debtors hold 52.63%. Inventory and loans and advances hold total current assets portion of 29.63% and 16.65 respectively. Cash and bank balance hold lowest portion of total current assets of 1.09%. current liabilities and provision was a 1786.64 and net working was 3262.18. Table 5: Average Growth of Working capital components during holding period 2012-2016 COMPONENTS CIPLA DR. REDDY SUN PHARMACY LUPIN Inventories 12.46 6.39 35.1 14.24 sundry current debtors liabilities 5.73 13.65 18.97 6.23 29.66 57.6 32.15 7.54 cash provision and bank balance -0.94 23.61 16.99 10.55 52.83-40.24 28.12 11.05 loans Total and current advances liabilities 11.79 15.51 8.24 9.45 55.24 41.71 11.81 7.11 Total current assets 10.05 12.69 21.23 21.84 35
net working capital 7.3 15.28-33.34 27.81 IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319 2828 Chart 1: INFERENCE: Lupin ltd has a highest net working capital during holding period followed by Dr.reddy ltd. It is negative with Sun Pharmacy cy. An average current liability is highest with Sun Pharmacy cy followed by Ciplaltd. It is lowest with Dr.reddy ltd compare to others. Total current assets are growing same with slite difference with Sun Pharmacy cy and Lupin, while it is only 10.05% with cipla. Sundry debtor s growth is only 5.73 and 18.97 of Ciplaand Dr reddy respectively that show good position in credit management. 36
Table 6: Average Growth of Working capital components during holding period 2012-2016 SUN CIPLA DR REDDY year PHARMACY LUPIN GOC NOC GOC NOC GOC NOC GOC NOC 2012 242.17 193.05 171.69 123.37 303.83 239.31 124.29 60.18 2013 242.53 193.98 179.58 138.41 324.22 259.07 127.62 63.86 2014 162.93 115.31 309.25 272 262.19 205.86 139.07 75.27 2015 189.49 133.93 413.24 381.81 178.96 126.91 148.97 84.54 2016 147.35 98.92 347.63 361.83 272.71 199.54 164.44 98 AVERAGE 196.894 147.038 284.278 255.484 268.382 206.138 140.878 76.37 RANK 2 4 3 1 INFERENCE: For all companies, GOC is showing volatile trend in the overall study period. Average GOC is highest with Dr.reddy lab i.e., 284.27 days followed by Sun Pharmacy cy i.e., 268.38 and Ciplai.e., 196.89 days. NOC of Lupin is 76.37 lowest compare to other companies that shows very good management of working capital. Table 7: Working Capital ratio analysis of CIPLALTD. 37
RATIO 2016 2015 2014 2013 2012 MEAN S.D MIN MAX INVENTRORY TURNOVER 4.18 3.11 3.77 3.50 3.82 3.68 0.36 3.11 4.18 DEBTORS TURNOVER 6.08 5.35 5.56 5.18 4.63 5.36 0.47 4.63 6.08 SALES/WORKING CAPITAL 3.60 3.42 3.56 1.84 1.94 2.87 0.80 1.84 3.6 RECEIVABLE DAYS 59.17 67.48 64.42 69.63 77.81 67.70 6.16 59.17 77.81 INVENTRORY DAYS 92.97 103.53 92.71 91.7 95.64 95.31 4.31 91.7 103.53 PAYABLE DAYS 48.43 55.56 47.62 48.55 48.07 49.65 2.97 47.62 55.56 CURRENT RATIO 2.1 1.84 2.11 2.99 4.17 2.64 0.86 1.84 4.17 QUICK RATIO 1.15 0.93 1.09 1.99 2.64 1.56 0.65 0.93 2.64 INTERENCE: Average inventory of Ciplaltd is 3.68 during five years, it is highest in the year 2016 and lowest in 2015 while average sales of to WC ratio of the company are 2.87 it is highest in 2016 and lowest in 2013. Receivable days is volatile for past 5 years it is highest 2012 and lowest in 2016. Inventory days are fluctuating during past five years it is highest in 2015 lowest in 2013. Average current ratio of the company is 2.64 during the study period that shows very good liquidity position of the company. Table 8: Working Capital ratio analysis of DR REDDY LAB. RATIO 2016 2015 2014 2013 2012 MEAN S.D MIN MAX INVENTRORY TURNOVER 6.06 5.86 6.16 5.57 5.11 5.75 0.38 5.11 6.16 DEBTORS TURNOVER 2.37 2.16 2.59 3.44 3.63 2.84 0.59 2.16 3.63 SALES/WORKING CAPITAL 1.94 1.76 2.05 3.37 3.64 2.55 0.79 1.76 3.64 RECEIVABLE DAYS 152.59 167.66 140 105.29 99.97 133.10 26.43 99.97 167.66 INVENTRORY DAYS 60.7 59.94 58.02 61.22 64.33 60.84 2.05 58.02 64.33 PAYABLE DAYS 30.8 31.43 37.45 41.17 48.32 37.83 6.51 30.8 48.32 CURRENT RATIO 2.1 2.22 2.17 1.62 1.43 1.91 0.32 1.43 2.22 QUICK RATIO 1.75 1.86 1.78 1.25 1.12 1.55 0.30 1.12 1.86. 38
INTERENCE: Average inventory of Dr.reddy ltd is 5.75 during five years, it is highest in the year 2016 and lowest in 2012 while average sales of to WC ratio of the company are 2.55 it is highest in 2012 and lowest in 2015. Receivable days are volatile for past 5 years it is highest 2015 and lowest in 2012. Inventory days are fluctuating during past five years it is highest in 2012 lowest in 2014. Average current ratio of the company is 1.91 during the study period that shows good liquidity position of the company Table 9: Working Capital ratio analysis of SUN PAHRMA. RATIO 2016 2015 2014 2013 2012 MEAN S.D MIN MAX INVENTRORY TURNOVER 3.63 3.73 3.19 2.9 6.38 3.97 1.24 2.9 6.38 DEBTORS TURNOVER 3.99 7.11 4.75 3.35 6.39 5.12 1.42 3.35 7.11 SALES/WORKING CAPITAL 1.62 2.17 1.28 1.32 1.06 1.49 0.38 1.06 2.17 RECEIVABLE DAYS 76.17 48.2 51.72 71.46 71.49 63.81 11.49 48.2 76.17 INVENTRORY DAYS 77.38 57.99 63.92 74.22 80.31 70.76 8.45 57.99 80.31 PAYABLE DAYS 73.17 52.05 56.33 65.15 64.51 62.24 7.37 52.05 73.17 CURRENT RATIO 2.33 1.79 3.12 4.05 3.93 3.04 0.88 1.79 4.05 QUICK RATIO 1.85 1.44 2.6 3.14 3.14 2.43 0.69 1.44 3.14 INTERENCE: Average inventory of Sun Pharmacy cy 1.24 during five years, it is highest in the year 2012 and lowest in 2013 while average sales of to WC ratio of the company are 1.49, it is highest in 2015 and lowest in 2012. Receivable days are volatile for past 5 years it is highest 2016 and lowest in 2015. Inventory days are fluctuating during past five years it is highest in 2012 lowest in 2014. Average current ratio of the company is 3.94 during the study period that shows liquidity position of the company is not good it is crossed the range of 3%. Table 9: Working Capital ratio analysis of LUPIN LTD. RATIO 2016 2015 2014 2013 2012 MEAN S.D MIN MAX 39
INVENTRORY TURNOVER 5.95 5.66 6.57 5.4 4.83 5.68 0.58 4.83 6.57 DEBTORS TURNOVER 3.19 3.63 3.78 4.23 3.95 3.76 0.35 3.19 4.23 SALES/WORKING CAPITAL 3.26 3.14 3.27 4.54 5.83 4.01 1.05 3.14 5.83 RECEIVABLE DAYS 91.89 72.65 74.67 74.61 77.76 78.32 6.98 72.65 91.89 INVENTRORY DAYS 72.46 65.73 65.48 69.24 75.12 69.61 3.76 65.48 75.12 PAYABLE DAYS 66.97 64.43 63.78 63.76 64.11 64.61 1.21 63.76 66.97 CURRENT RATIO 1.82 2.1 2.32 1.71 1.39 1.87 0.32 1.39 2.32 QUICK RATIO 1.23 1.43 1.51 1.06 0.84 1.21 0.24 0.84 1.51 INTERENCE: Average inventory of Lupin ltd 5.68 during five years, it is highest in the year 2014 and lowest in 2013 while average sales of to WC ratio of the company are 4.01, it is highest in 2012 and lowest in 2015. Receivable days are volatile for past 5 years it is highest 2016 and lowest in 2015. Inventory days are fluctuating during past five years it is highest in 2012 lowest in 2013. Average current ratio of the company is 1.87 during the study period that shows liquidity position of the company is good. Table 9: Comparative analysis of Average Ratio of selected companies during five years. RATIO CIPLA DR REDDY SUN PHARMACY LUPIN INVENTRORY TURNOVER 3.68 5.75 3.97 5.68 DEBTORS TURNOVER 5.36 2.84 5.12 3.76 SALES/WORKING CAPITAL 2.87 2.55 1.49 4.01 RECEIVABLE DAYS 67.7 133.1 63.81 78.32 INVENTRORY DAYS 95.31 60.84 70.76 69.61 PAYABLE DAYS 49.65 37.83 62.24 64.61 CURRENT RATIO 2.64 1.91 3.04 1.87 QUICK RATIO 1.56 1.55 2.43 1.21 40
Chart 2 INFERENCE: Dr.Reddy lab is in top position in inventory turnover with 5.76 followed by Lupin ltd 5.68 and Sun Pharmacy 3.97. Debtors turnover ratio highest with Ciplaltd i.e., 5.36 followed by Sun Pharmacy cy with 5.12 and Lupin ltd with 3.76. Lupin ltd is top position in sales over working capital with 4.01 followed by Ciplaltd 2.87 it is lowest with Sun Pharmacy cy 1.49. Inventory days are highest with Dr.Reddy lab with 133.1 followed by Lupin ltd with 78.32 lowest is Cipla67.7. all companies have maintained current ratio less than 2:1 expect Lupin and Dr.reddy lab 1.87, 1.91 respectively. Findings: 1. Inventory of the Cipla is 12.46 highest compare to other companies, it show good sales. Whereas lowest with the Dr.Reddy lab. 2. Debtors of the Lupin ltd are 32.15 highest that shows more effective in the management of debtors but lowest with the Cipla ltd. 41
3. Net working capital is highest with Lupin ltd is 27.81 compare to other companies where as negative net working capital with Sun pharmacy. 4. The average growth rate of net operating cycle of Lupin ltd is 76.37 it is lowest compare to other companies that show good working capital management. Whereas Dr.Reddy lab is 25.48. 5. Inventory turnover ratio highest in Dr.Reddy lab that show good sales. It is lowest with Cipla ltd. Suggestion: 1. Inventory and inventory turnover ratio of the Dr.Reddy lab as lowest the companies as to concentrate on the sales strategies by implementing the various marketing activities that leads to increase the profit. 2. Debtors turnover ratio is lowest with the Cipla ltd that means the companies has to manage debtors better ways money from the debtors are not collected fast, they have take quick action in collecting. 3. Net working capital of Sun pharmacy is negative i.e., -33.34 which means company current liabilities exceed its current assets, that may affect on growth of the company they have work on current assets over current liabilities. 4. The net operating cycle is short is good as it tells that the company cash is tied up for a short period where Dr.Reddy lab is 255.48 is highest when compare to other company that is work on sells and as well as cash receivable immediately. Conclusion: 42
Decision relating to working management involves managing the relationship between a firms short term assets and its short term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operation expenses. Relating to the study of the comparative of different pharmaceutical companies of working capital management, the net working capital is good with Lupin. Dr reddy and Cipal but negative with the Sun pharmacy ltd that indicate company has a obstacle in day to day operation that as properly not maintained. The overall study shows that working capital management is in good manner. References: 1. M Y Khan P K jain Financial management fifth edition :The McGraw Hill Companies. 2. Pandey I M Financial management Delhi : Vikas publication pvt Ltd. 3. Prof. Kalpesh P prajapathi (2012):A comparative study on working capital management of selected steel companies of India. 4. Lalit kumar joshi (2012): working capital management of cipla limited: an empirical study. 5. Dimple (2013): A Comparative Study of Working Capital Management of Infosys and Tata Consultancy Services Ltd. 6. Mohan, Reddy P. (1991): Examined the various aspects relating to working capital management among six selected large-scale private companies in Andhra Pradesh. 7. Bhunia and Khan (2011): Analyzed the liquidity management efficiency of Indian steel company. 8. Vedavinayagam Ganesan (2007) : An Analysis of working capital management efficiency in telecommunication equipment industry. 9. B. Bagchi, B Khamrui: Relationship between working capital management and profitability: A study of selected FMCG companies in India. 10. Swaran Singh & S.K.bansal (2010): comparative study on management of working capital in IFFCO & KRIBHCO. 43
44