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Profitability and Liquidity. Do they move together?

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Profitability and Liquidity. Do they move together?

Jerry Johny

Jerry Johny "Profitability and Liquidity. Do they move together?" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-1 , December 2017, URL: http://www.ijtsrd.com/papers/ijtsrd8279.pdf

While studying the basics of financial management students are often taught that liquidity and profitability both very important for business in terms of Survival and growth don't often go hand in hand with each other. In almost all theories there exist an inverse relationship between liquidity and profitability primarily due to the Limited nature of financial resources. Most often firms have to decide on using the available funds for short term purposes to meet the liquidity needs or to finance the long term necessities of making profit and growing in the long term. The main objective of the study is to analyse what kind of relationship exist between liquidity and profitability with specific concentration on Indian industry. In the study we have considered random companies from the Pharmaceutical sector that are part of the Pharmaceutical sectoral index of the NSE. We have used selective ratios to represent profitability and liquidity and used correlation analysis to identify what kind of relationship exist between them.

Profitability, liquidity, Pharmaceutical sector, NSE, correlation

Volume-2 | Issue-1 , December 2017