The Impact of Financial Ratios on Firm Profitability

In any investment, investors are seeking to obtain return and trying to get information from the future amount of profitability of companies. One of the most common methods to examine financial information is to prepare financial ratios. This study aims to find the variable with the greatest perspective to explain profitability. The investor, whether personal stockholders or the firms, are in need of a model to assess the performance of the companies and determine their expected profitability. Financial ratios play an important part in the development of a company with an effective way, if a company is not maintaining financial ratio efficiently it will directly hit the performance of the company, different financial ratios like Profitability ratios, Liquidity ratios, Gearing ratios, and yield ratio have a major role in judgment of the progress of a company by the new investor and existing investors.

The pharmaceutical industry in Pakistan has grown during the last few decades. At the time of the independence of Pakistan in 1947, there were few production units in the country. Currently, Pakistan has more than 800 large volume pharmaceutical formulation units, including those operated by 25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets around 90% of the country's demand for finished dosage forms and 4% of Active ingredients. Specialized finished dosage forms such as soft gelatin capsules, parenteral fat emulsions, and Metered-dose inhalers continue to be imported. There are only a few bulk drug Active ingredient producers and Pakistan mainly depends on imports of bulk drugs for its formulation needs resulting in frequent drug shortages. Political disturbances and allegations of under-invoicing add to the uncertainty of imports and clashes with the customs and tax authorities are common. The National pharmacy industry has shown growth over the years, particularly over the last decade. The industry is trying to upgrade itself and today the majority industry is following local Good Manufacturing Practices laws, with a few in accordance with international guidance.