International Journal of Science and Research (IJSR) ISSN: 2319-7064 ResearchGate Impact Factor (2018): 0.28 | SJIF (2018): 7.426 Volume 8 Issue 9, September 2019 www.ijsr.net Licensed Under Creative Commons Attribution CC BY Analysis on Inventory Turnover Ratio of Select SAP Implemented Pharmaceutical Companies Kuruganty Seetha Ram Babu 1 , Dr. A. V. Satyanarayana 2 , Dr. A. Prabhu Kumar 3 1 Research Scholar JNTU Hyderabad, 2 Professor Emeritus, Department of Business Management Osmania University, Hyderabad 3 Director, School of Management Science, JNTUH, Hyderabad Abstract: Inventory Turnover is one of the important inventory ratio which decides the sustenance and growth of an organization irrespective of size, brand, industry sector, geographical location, usage of technology, working capital management, corporate culture, management decision skills and still many more other factors that influence organization to hold and enhance the market share in the highly dynamic competitive environment. The impact of implementation of SAP technology on the pharmaceutical sector and its inventory Turnover ratio outcome on few select companies located in Hyderabad is emphasized. Keywords: SAP, Inventory Turnover Ratio, Pharmaceutical and Inventory 1. Introduction The inventory turnover ratio is defined as a measure of the number of times the inventory is sold by company during a year. The inventory turnover ratio is a standard measure of an organization operational efficiency in management of assets. Maximizing inventory turnover reduces overhead costs, thus improves the profitability of an organization. Inventory turnover is inversely proportional to inventory holding and is also known as inventory turns, merchandise turnover and stock turnover. Low inventory turnover is an outcome of overstocking, obsolescence or deficiencies, the product cost goes up due to increase in storage location costs. But in few situations a low inventory turnover is appropriate where higher inventory levels transpire in-anticipation of briskly rising prices or product unavailability due to market shortages. High inventory turnover indicates insufficient inventory levels, which lead to lost business opportunities. Increasing inventory turns reduces holding costs which in-turn increases net income. 2. Literature Survey C. Madhusudhana Rao et al., 2009, ITR measures effective utilization of financial resources of the firm and ability of management to use them effectively and efficiently. Ananth Raman et al., 2004, showed inventory turnover cannot be used as performance analysis parameter since increased inventory turnover is proportional to decreased gross margin, which in no way can be interpreted as improved inventory management. Firm expertise to control variance in annual inventory turns is an indication of better management of inventory Aghazadeh, 2009 Gaur et al., 2005, proved inventory turnover is positively correlated with sales and negatively correlated with profit margin percentage, inventory turnover ratio is influenced by sales surprise, gross margin and capital where varied across different segments of industry. M. Kiracı et al., 2009 determined that there is a positive relationship between inventory turnover and return on assets and net profit margin and a negative relationship between inventory turnover and gross profit margin. Lieberman and Demeester (1997) analyzed the effect of high inventory turnover results in productivity growth and increased profitability 3. Methodology Objectives Analyze the performance of select pharmaceutical companies using inventory turnover ratio. Hypothesis Three pharmaceutical companies which belong to pharmaceutical industry, that have implemented SAP and are located in Hyderabad were considered for the study. Null Hypothesis (H 0 ): There is no significant difference before and after implementation of SAP. Alternate Hypothesis (H 1 ): There is a significant difference before and after implementation of SAP. Data Sources of Data: Data drawn from the balance sheets of respective companies. Software Software Used: The data analysis is carried out using SPSS 16.0 software. Statistical Tools and Techniques: Paired t-test: The paired t-test is a statistical procedure confirms whether the mean difference between two sets of observations is zero, it is applied to evaluate the impact of implementation of SAP using inventory turnover ratio, before and after implementation of SAP. Paper ID: ART2020925 10.21275/ART2020925 113