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Cited by 43Working Capital and Financial PerformanceFinancial Analysis and Corporate GovernanceCorporate Finance and Governance

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The Relationship between Liquidity and Firms’ Profitability: A Case Study of Karachi Stock Exchange

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Bibi, Nazish, Amjad, Shehla·2017·Asian Journal of Finance & Accounting
DOI 10.5296/ajfa.v9i1.10600
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Abstract

The purpose of this paper is to investigate the relationship between firm’s liquidity and profitability; and to find out the effects of different components of liquidity on firms’ profitability.The relationship between liquidity and firms’ profitability is empirically examined by collecting the data of 50 listed firms of Karachi Stock Exchange, Pakistan. Panel data has been collected from secondary sources for the year 2007 to 2011 .Net operating income and Return on assets are used measure of firm’s profitability. Liquidity of the firm is measured by using cash gap in days and current ratio. Firm size measured by net sales, total assets and market capitalization .The study applies regression analysis to determine factors affecting profitability. Incremental tests are carried out to see the importance of individual variables in the model.The results of correlation and regression analysis showed that there is a significant negative relationship between cash gap and return on assets while current ratio has significant positive relationship with profitability. Results further indicate that log of sales and log of total assets has positive significant relationship with profitability. The findings of this study are based on firms listed on the Karachi Stock Exchange (KSE). Hence, the results cannot be generalizable to those firms which are not listed on Karachi stock exchange. The sample of the study comprises only the merchandising and manufacturing firms. Banks are excluded due to their nature of work.

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Metadata

Authors
Bibi, N., & Amjad, S.
Affiliations
COMSATS University Islamabad (PK)
Venue
Asian Journal of Finance & Accounting
Publisher
Macrothink Institute, Inc.
Published
2017-02-08
Volume
9
Issue
1
Pages
54
ISSN
1946-052X (ISSN-L)
DOI
10.5296/ajfa.v9i1.10600
OpenAlex
W2586492610
Cited by
43
References
1
Citations by year
2026: 1 · 2025: 1 · 2024: 4 · 2023: 8 · 2022: 7 · 2021: 7 · 2020: 2 · 2019: 8 · 2018: 3 · 2017: 2
FWCI
13.29
Type
journal article
Language
en
Open access
Locations
Asian Journal of Finance & Accounting (publishedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
Keywords
liquidity, firm profitability, current ratio, return on assets, Karachi Stock Exchange, listed companies, firm size, net operating income, financial ratios

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