An Analysis Of Liquidity Ratio Of Sun Pharmaceutical Limited

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Liquidity Ratios of Sun Pharmaceutical Limited:
The above table – 2 shows the liquidity parameters to measure the liquidity position of the Sun Pharmaceutical Company Limited for ten years.
Current Ratio:
Current ratio shows working capital position of the firm. It is also known as a working capital ratio. It shows excess amount of current assets than current liabilities. It is used to judge firm’s short term capacity to pay off its obligation. Current Ratio = Current assets/current liabilities. Higher ratio shows good position of the company to pay off its obligation in time. Traditionally current ratio of any production firm is 2:1 considered good except banking sector. It’s also depends on nature of business. Table – 3 shows the fluctuation
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It is also known as a quick ratio or acid test ratio. Liquid Ratio = liquid assets / liquid liabilities. Here, a liquid asset is equal to short term liabilities minus inventories. This ratio shows firms ability to pay off short term liabilities from liquid assets. Mostly the liquid ratio 1:1 shows ideal position of the firm to pay off short term liabilities from the liquid assets.
From the above Table – 3 it can be observed that liquid ratio shown fluctuating trend during the study period. In 2005-06 current ratio was 5.86 times which decreased continuously for a two years and reached at 1.67 times in 2007-08. Afterwards ratio shown steady position for two years with minor difference but in 2010-11 it increases with 2.40 times. In last two years of study period it shown with 0 .17 and -0.41 respectively in 2013-14 and 2014-15.
Average ratio of the above company shown 2.23 which is show that firm have a ability to pay off its short term liabilities within stipulated time but excess amount of cash invested in liquid assets refers loss of optional income. The standard deviation and C.V. 1.91 times 86.08% respectively shown high variation between the liquid ratios of the firm during the study
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Business Standard. 17 February 2014. Retrieved 17 February 2014
• file:///C:/Users/ADMIN/Desktop/New%20folder/Sun%20Pharmaceutical%20-%20Wikipedia,%20the%20free%20encyclopedia.htm
• "CCI clears Sun Pharma-Ranbaxy deal". Reuters India. Retrieved 2 July 2015.
• "Sun Pharma to buy Ranbaxy in $3.2 bn deal". timesofindia-economictimes. Retrieved 2 July 2015
• .file:///C:/Users/ADMIN/Desktop/New%20folder/Pharmaceutical%20industry%20in%20India%20-%20Wikipedia,%20the%20free%20encyclopedia.htm
• file:///C:/Users/ADMIN/Desktop/New%20folder/Sun%20Pharmaceutical%20-%20Wikipedia,%20the%20free%20encyclopedia.htm
• file:///C:/Users/ADMIN/Desktop/New%20folder/Sun%20Pharmaceutical%20Industries%20Balance%20Sheet,%20Sun%20Pharmaceutical%20Industries%20Financial%20Statement%20&%20Accounts%20bs%206%20to%2010.htm
• file:///C:/Users/ADMIN/Desktop/New%20folder/Sun%20Pharmaceutical%20Industries%20Balance%20Sheet,%20Sun%20Pharmaceutical%20Industries%20Financial%20Statement%20&%20Accounts%20bs%2011%20to%2015.htm
• Michael Firth, Management of Working Capital, London, The McMillan press Limited, 1976

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