Working capital practices in pharma industry – a case study of Aurobindo Pharmacuiticals Limited

Capital is the life blood of any business. The overall success of any business depends to a major extent on efficient and effective management of funds. Efficient liquidity management involves planning and controlling of current assets and current liabilities in such a manner that eliminates the risk of the liabilities to meet due to short term obligations on the one hand and avoids excessive investments in these assets on the other. This is, due in part, to the reduction of the profitability of running out of cash in the presence of liquid assets. The working capital approach to liquidity management has long been the prominent technique used to plan and control liquidity. The working capital includes all the items shown on company's balance sheet as short term of current assets, while net working capital excludes current liabilities. This measure is considered a useful tool in assessing the availability of funds to meet current operations of companies. Based on this theoretical background, a comprehensive study of Aurobindo Pharmaceutical limited, relate to its working capital decisions and practices for the period 2003 to 2012 has been attempted to evaluates the liquidity, profitability, risk trade off, working capital leverage and zero working capital.