Abstract
To understand the financial condition of a firm, it is mandated to evaluate the financial fitness of a firm, whether manufacturing, trading and service rendering etc. The main purpose of this research is to measure the financial fitness of leading pharmaceutical industries and listed on the stock exchange in Bangladesh. This study employs a sample of seven companies from pharmaceutical industries in Bangladesh where Altman’s Z-score model is used to assess the financial fitness of those companies by the prediction of whether they will go into bankruptcy within the next two years. By applying the model, it is revealed that SQUARE Pharmaceuticals Ltd, Renata Limited and IBN SINA Pharmaceutical Limited are in a very good position with higher Z-Score. Beacon Pharmaceuticals Limited and Ambee Pharmaceuticals Limited are heading toward good scores. But ACI Limited and Beximco Pharmaceuticals Limited are financially unhealthy and there is a possibility of going into bankruptcy in the near future. The finding of the study suggested the main reason for such a situation is that the performance of companies is differed by declining market value of shares, falling total asset turnover, inadequate proportion of EBIT to total assets and insufficient liquid assets etc. JEL Classification Codes: G33, G53, M10.
Highlights
Bangladesh is one of the least developed countries which meets about 98% of its demand for pharmaceutical products
The results of Z Score in each study period is above 2.99, which means the company is in a safe zone and the financial performance of the company is very good, which indicates that the firm is not likely to go into bankruptcy in the future
According to the figure 3, the results of Beacon Pharmaceuticals Limited's Z Score value from 2015 to 2018 accounting years are between 1.8 and 2.99, indicating that it is in the grey zone of 1.8 to 2.99
Summary
Bangladesh is one of the least developed countries which meets about 98% of its demand for pharmaceutical products. It has a market size of nearly BDT 200 billion. Bangladeshi pharmaceutical products are exported to 147 countries. This industry contributes about 1.85% of total GDP. The industry is growing due to the increase in per capita income of the people, their hectic daily activities, an aging population, changing lifestyles and economic status, unhealthy eating habits, increasing incidence of chronic diseases etc. Which provide industry players an opportunity to grow. Bangladesh’s pharmaceuticals market size will reach more than BDT 400 billion by 2023 (Niti, 2019)
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