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How Gainfully Can A Pharmaceutical Company Borrow In the 21st Century?

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  • Jigar Aggarwal

Abstract

When a company involves debt in its capital structure, it has to bear fixed charges and this has deep impact on the company’s profitability and liquidity. This paper focuses on there lationship between leverage and profit ability in West Coast Pharma Limited. The financial statements of West Coast Pharma Limited have been collected over a period of 7years (from 2009-10 through 2015-16). Various tools and techniques employed reveal that the degree of operating leverage is found to have statistically significant positive correlation with the ROI as also that the degree of financial leverage is positively correlated with the ROI. It is suggested that West Coast Pharma Limited should revamp its capital structure such that it should include the optimum blend of equity and borrowed funds so that it has positive impact on Return on Investment. Further more, degree of combined leverage is positively correlated with ROI of West Coast Pharma. It follows that West Coast Pharma has not significantly resorted to the use of debtfunds which also deprives it of the benefits of financial leverage. Key Words: Combined Leverage, Financial Leverage, Operating Leverage, Profitability and ROI Policy

Suggested Citation

  • Jigar Aggarwal, 2017. "How Gainfully Can A Pharmaceutical Company Borrow In the 21st Century?," Working papers 2017-03-17, Voice of Research.
    • Handle: RePEc:vor:issues:2017-03-17
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