Although during the last four decades, in the US, UK and some other developed countries a considerable number of studies have been carried out on the evaluation of the interrelationship between management of fund and profitability, this debatable issue has not been addressed with due importance in India. Moreover, the findings of the studies so far made are conflicting in nature. Therefore, a controversy is still persisting over this issue. Furthermore, no study on the Indian pharmaceutical industry in connection with this unresolved issue has yet been made in the recent past. In this backdrop, this paper makes an attempt to examine empirically the relationship between fund management and profitability of 25 selected pharmaceutical companies belonging to the Indian private sector during the period 1993-94 to 2004-05. The issue has been tackled using relevant statistical tools and techniques.

Efficient fund management is an integral part of the overall corporate strategy to create shareholder value. Fund management implies the effective and efficient acquisition, allocation and utilization of funds. The efficiency with which funds are managed is gleaned from turnover ratios. Turnover ratios measure how rapidly the assets are being turned over into sales. In other words, they indicate how well the company manages its funds and indicates sales turnover for every rupee of fund. The way in which funds are managed can have a significant impact on the profitability of the company. It is an empirical question whether a high value of turnover ratio has a positive influence on the company's earning capability. A company can have larger sales with a very liberal credit policy, which shrinks the debtors turnover ratio. In this case, the lower debtors turnover ratio may result in higher profitability. However, as per the traditional view, a low value of turnover ratio hits the company's profitability. During the last four decades, in the US, UK and some other developed countries, several studies had been carried out on fund management. A considerable number of these are connected with the evaluation of the interrelationship between utilization of funds and profitability. Lemke (1970), Gentry (1976), Foster (1978), Smith (1980) and Shin and Soenen (1998) are among the prominent contributors who extensively investigated this issue. The findings of their studies are conflicting in nature.

In fact, there are many intricacies in assessing the influence of management of different asset components on the profitability of a firm. Moreover, the interrelationship between fund management and profitability is still a debatable issue. Further more, this controversial topic has not been addressed with due importance in India. No study on the Indian pharmaceutical industry in connection with this unresolved issue has yet been made in the recent past. Against this backdrop, this paper examines the relationship between fund management and profitability of some selected pharmaceutical companies in India during the period 1993-94 to 2004-05. To measure the impact of fund management on profitability in the Indian pharmaceutical industry by computing Pearson's simple correlation coefficient, Spearman's rank correlation coefficient and Kendall's correlation coefficient between Profit Before Interest and Tax Margin (PBITM), and each of some selected efficiency indicators of fund management and between Return on Capital Employed (ROCE) and each of these efficiency parameters for each of the companies selected in this study.

Management Research Journal, Fund Management, Pharmaceutical Companies in India, Indian Pharmaceutical Industry, Return on Capital Employed, ROCE, Fixed Assets Turnover Ratio, Inventory Management, Financial Statement Analysis, Business Administration, Financial Management.