Abstract:
Management of liquidity has become a crucial issue in today's dynamic competition
between banking sector to attain maximum profitability for achieving target and to survival in the
competitive world. This study is aimed to identify the liquidity management on profitability of
commercial banks in Sri Lanka during the period of 5 years from 2008 to 2012. In Sri Lanka eight banks
are listed under Colombo stock exchange (CSE). Hence, out of eight, only five banks are selected for
the study purpose as convenience. Correlation and regression analysis were used in the analysis and
findings revealed that there is a significant relationship exists between liquidity and profitability
among the commercial banks in Sri Lanka. Here Liquidity of bank was measured through the Liquid
Assets Ratio (LAR), Current Ratio (CR), Reserve Ratio (RR) and Capacity Ratio(CAR) and profitability
was measured by Return on Asset (ROA) and Return on Equity (ROE) Ratios.
