Relationship Between Working Capital Management Efficiency and Profitability: A Comparative Study on Square Pharmaceuticals Limited and Beximco Pharmaceuticals Limited, in Bangladesh

Abstract

Pharmaceutical is an important adjunct of industrialization in Bangladesh. This paper examines the effects of working capital management efficiency on the profitability of the two leading pharmaceuticals companies of Bangladesh - Square Pharmaceuticals Limited (SPL) and Beximco Pharmaceuticals Limited (BPL) and to make a comparison of financial efficiency between these two firms. The secondary data for a period of ten years (2006-2015) have been analyzed by using correlation, t-test, and different profitability, liquidity and solvency ratios. The study reveals that there is a significant relationship between working capital management efficiency and profitability of both of the firms. The study also finds Square Pharmaceuticals Limited is more efficient in working capital management than Beximco Pharmaceuticals Limited. The financial performance of Beximco Pharmaceuticals Limited should be improved immediately through the efficient management of working capital to increase its profitability.