Growth in Sales Compared with Chanses in Profitability and Insutry

Abstract

Technically speaking, the growth rate in sale must have a positive impact on profit position o f the firm . O f course, even reduction in the investment in working capital components should also have positive impact on profits. There would also, it is assumed, be a few cases wherein there could be no correlation between sales and profits and profit and working capital requirements. The present study, conducted on Indian pharmaceutical industry, focuses on studying these relations and rationale by establishing an appropriate methodology. The study revealed that the growth rate in profits was disproportional to the sales and working capital components like inventory and debtors.