Abstract:
Liquidity management and profitability are very
important issues in the growth and survival of business and
the ability to handle the trade-off between the two a source
of concern for financial managers.The study is also aimed at
finding the effect of changes in liquidity levels on
profitability of manufacturing companies in Sri Lanka. The
study covered listed manufacturing companies in Sri Lanka
over a period of past 5 years from 2008 to 2012. Correlation
and regression analysis were used in the analysis and
findings suggest that there is a significant relationship exists
between liquidity and profitability among the listed
manufacturing companies in Sri Lanka. Suggested that
Inventory Sales Period (ISP), Current Ratio (CR)and are
significantly correlated with Return on Asset (ROA),
Operating Cash Flow Ratio (OCFR)are significantly
correlated with Return on Equity (ROE) 5 percent level of
significance. At the same time ISP and OCFR also are
significantly correlated with ROA, Creditors Payment
Period (CPP) also is significantly correlated with ROE at 1
percent level of significance.
