Financial Performance During Covid-19: A Financial Ratio-Based Comparison of Multinational and Local Pharmaceutical Companies in Pakistan

Abstract

Financial-ratio analysis from financial statement is a key tool used in the evaluation of financial performance of companies. Financial ratios included liquidity-ratio, efficiency-ratio and profitability-ratio. Liquidity-ratio show the ability of company to repay long and short-term financial liabilities; efficiency-ratio explains the ability of the company how to utilize assets and resources while profitability-ratio measures the company ability to generate income. Current study assessed how Multinational and local pharmaceutical Companies in Pakistan managed financial performance by using financial-ratios from 2016 to 2023, covering pre-pandemic, during-pandemic and post-pandemic periods. The secondary data was collected by company's financial statements of twelve Pakistan Stock Exchange registered Multinational-pharmaceutical-companies (MPC) and national-pharmaceutical-companies (NPC). The findings of the study revealed that MPC had stronger liquidity position with an average (current-ratio MPC:2.23 vs. NPC:1.46) but faced declining cash reserves post-pandemic. Efficiency-ratio suggested that MPC (10.42 days) managed receivables more efficiently compared to NPC (32.92 days) and had shorter inventory holding periods for average of MPC (84 days) compared to NPC (116 days). However, both companies experienced post-pandemic payment delays; therefore account-payable turnover-ratio adversely affected. NPC maintained higher profit margins (NPC:19.92% vs. MPC:9.33%), while MPC offered superior investor returns during COVID (31.50%). Overall, MPC improved gross/net-profit-ratio and return-on-asset-ratio effectively during the crisis, whereas NPC sustained with stable profitability-ratio and improved liquidity-ratio. Hence, MPC firms exhibited better financial management practices, while NPC firms faced challenges, particularly in liquidity and cash-flow management. The post-COVID period proved to be the most difficult for both groups.