Do the giant players enjoy profitability? : Analytical study of Pharmaceutical Industry of India

Profit and profitability are the measurement of the success of business activities and indicate the future of the business or the industry based on previous data. Normally, the amount of profit varies as per the size of business or expansion of business activities while profitability or earning capacity supposed to be stationary if other factors remain constant.  The industry analysis reflects the trend while the firm analysis analyzes the insights of the industry. Sales revenue, total assets, and working capital of the pharmaceutical companies considered as size determinants of the firm while earnings before interest and tax (EBIT), profit before tax (PBT), and profit after tax (PAT) are to be considered as profit measures. The logical relationship of EBIT, PBT, and PAT established with the sales revenue, total assets, and owners’ equity to get the profitability of the pharmaceutical companies for operational efficiency, fund utilization, and owners’ point of view. Basically, ratio analysis is used to analyze the profitability and multiple correlations calculated to get the relationship of size determinants and profits. The averages of the rankings are used to get the governance of the size on profitability. The movement and sensitivity analysis is used to get the symmetry and impact of changes in the size of firm on the profitability of the Indian pharmaceutical companies. The aim of the study is to find out the impact of the firms’ size on the profitability of the businesses. The results of the study reveal that the size of the firm governs the profitability with some anomalies. The governance and movement sensitivity of size on profitability are stronger in smaller than bigger pharmaceutical companies in India.