Financial Diagnosis of Selected Listed Pharmaceutical Companies in Bangladesh

Abstract

Bangladesh has made impressive economic and social progress in the past decade, despite frequent natural disasters and external shocks. The average GDP growth over the last five years was over 6%. In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors within the country's economy. This sector is also providing about 97% of the total medicine requirement of the local market. But the financial progress of this industry is not satisfactory. Financial diagnosis indicates how well a company uses its assets, shareholders' equity & liability, revenue and expenses. This study attempts to refer to judgment of financial health, strength and weakness of this industry by measuring its past, present and future financial performance and risks. In spite of satisfactory level of bankruptcy of the industry as found by The Z-Score Model, it was observed from the study that the liquidity, profitability and solvency position of most of the selected pharmaceuticals are in average position. The causal factors behind this position are unsound financial management, inadequate working capital, slow conversion of receivables and inventory into cash, lower position of sales, higher amount of debt, no professional distribution house, restrictions on patent right, fixed mark-up system, contrary policy of the government, vulnerability of environmental risk and increased cost of production. Therefore, the concerned authority should take immediate measures for overcoming these limitations.

Keywords: Financial Diagnosis, Pharmaceuticals, Ratio Analysis, Correlation, T-test, Z-Score.