Evaluation of Financial Soundness through Bivariate Accounting Based Performance Measurement

This paper is empirical investigation of the evaluation of financial soundness of the firms operating in pharmaceutical sectors in India, and they are privately owned public limited companies. The secondary data from the published annual reports of the five years are taken into consideration to form the financial soundness. I investigated two major privately owned public limited pharmaceutical manufacturers, with five years data. This paper also focuses on the conflicting dimensions of involvement of individual ratios in framing the conclusion with respect to financial soundness in traditional way. Researcher has formed the bivariate relationship between set of financial ratios instead of traditional performance measurement of individual ratio. That is among other characteristics, researcher has used a state space of time, with time series data, and based on that formed the linear equation to verify the validity of the data base. It argues that advising is congruent while monitoring is dissonant with respect to measurement and analysis of financial soundness. This analysis provides possible existences of set of ratios relationships. The implication of the model coincides with observed features of financial ratio, and additionally tries to establish the statistical measurement and confidence level with respect to set of them. The paper has provided a strong relationship between the sets of ratios based on four distinct but interrelated issues.