IMPACT OF LIQUIDITY ON PROFITABILITY

Dr. N. R. V. Ramana Reddy; Dr. C. S. Saiprasad Reddy

Dr. N. R. V. Ramana Reddy Professor, Department of Economics, VSUPG Centre, Andhra Pradesh, India.
Dr. C. S. Saiprasad Reddy Deputy Registrar & Controller of Examinations, V. S. University, Andhra Pradesh, India.

Keywords: LIQUIDITY, PROFITABILITY

Abstract

Management of liquidity and profitability has become a crucial issue in today’s cutthroat competition in business. Apparently, liquidity and profitability goals conflict in most of the decisions, which the finance manager makes. In this direction, the present study analyzed the financial performance of BHEL ltd. by establishing the relationship between liquidity and profitability with Multiple Regression Model for the period from 2007 to 2016. The calculated Current ratios and Super Quick Ratios are below the standard norm in the study period. Further, the study also observed that the ROI was down ward trend. The coefficients of Quick Ratio, Super Quick Ratio, and Debt Equity Ratio are negative and insignificant, shows negative effect of these ratios on Return of Investment. The coefficient of Interest Coverage Ratio is negative and statistically significant at 10 percent probability level. The study reveals that impact of liquidity on profitability was negative.

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