The Impact of Liquidity Management on Firm Profitability, an Empirical Analysis of Pakistani Cement Companies Listed On Karachi Stock Exchange in Pakistan

Abstract

In this study investigate the impact of liquidity management on firm profitability, an empirical analysis ofPakistani cement companies listed on Karachi Stock Exchange Pakistan for the period of six years 2006-2011.The nature of the data is secondary and selected 18 companies form the cement sectors of Karachi stockexchange. This paper was set out to explore the seemingly controversial profitability / liquidity trade off theory.From literature, the controversy as regard the relationship and impact of liquidity on profitability is yet to beresolve as divergent finding exist. Our empirical investigation using both the correlation and regression analysisreveal that liquidity ratios measure by current ratio, Quick ratio and cash ratio sales growth and firm size have apositive and significant relation with ROA while Debt ratio has negative relationship with ROA. Regressionanalysis reveals that current ratio, Quick ratio, cash ratio and firm size have a minute insignificant impact onROA. The implication of liquidity has low degree of influence on the profitability of cement companies inPakistan. This only goes to indorse inefficiency and ineffectiveness in the management of liquid assets.Keywords: - Liquidity Management, Firm Profitability and Pakistani Cement Companies.