Authors : Dr. Vinay Kumar

Volume/Issue : Volume 8 - 2023, Issue 10 - October

Google Scholar : https://tinyurl.com/46nvkrha

Scribd : https://tinyurl.com/2y9c5cm6

DOI : https://doi.org/10.5281/zenodo.10184222

Abstract : The present paper aims to measure the financial distress of top five pharmaceutical companies operating in India using Altman’s Z score model. This model is widely used throughout the world to identify financial distress in the company. The classical z score model is based on 5 ratios i.e. working capital to total asset ratio, retained earnings to total asset ratio, EBIT to total asset ratio, market value of equity to total liabilities and sales to total asset ratio. The study concluded that four companies fall in the Safe zone according to z score. These companies with average z score of last 5 years are Sun (9.09) pharma, Dr Reddy (7.61), Cipla (9.097) and Zydus (4.31). Thus, these companies are financially sound and may not face the problem of financial distress. Torrent pharma with average z score of 2.52 falls in Grey zone. Management needs to take immediate steps to improve the financial condition to avoid financial distress in the near future.

Keywords : Altman z score, Financial distress, Safe zone, Bankruptcy.