LIQUIDITY AND PROFITBILITY
Liquidity and profitability are two important demanders in determining the soundness of an enterprise. Liquidity means ability of a firm to meet its current obligations when they become due for payment. It has two aspects – quantitative and qualitative. Quantitative aspect implies the quantum of current assets a firm possesses irrespective of making any difference between various types of current assets such as inventories, cash and so on. Qualitative aspect implies the quality in terms of their realization into cash considering time dimension involved in maturing different components of current assets. Profitability is the capacity of earning profits and it is most important measure of performance of a firms. It is generally assumed that there is negative relationship between liquidity and profitability i.e. higher liquidity results in lower profitability and vice-versa.
Objectives of the Study
To study the growth and development of the company.
To study the behavior of liquidity and profitability of the companies.
To analyze the factors determining the liquidity and …show more content…
Nevertheless, they provide some extreme useful information to the extent that the balance sheet shows the financial position on a particular date in terms of the structure of assets, liabilities and owner’s equity and so on, and the profit and loss account expose the results of operations for a certain period of time in terms of the revenue obtained and the cost incurred during the financial year. Thus the balance sheet and profit and loss account statement provides a summarized a view of the financial position and financial performance or operations of the firm. The analysis of financial statement is thus an important aid to financial
Liquidity and profitability are two important demanders in determining the soundness of an enterprise. Liquidity means ability of a firm to meet its current obligations when they become due for payment. It has two aspects – quantitative and qualitative. Quantitative aspect implies the quantum of current assets a firm possesses irrespective of making any difference between various types of current assets such as inventories, cash and so on. Qualitative aspect implies the quality in terms of their realization into cash considering time dimension involved in maturing different components of current assets. Profitability is the capacity of earning profits and it is most important measure of performance of a firms. It is generally assumed that there is negative relationship between liquidity and profitability i.e. higher liquidity results in lower profitability and vice-versa.
Objectives of the Study
To study the growth and development of the company.
To study the behavior of liquidity and profitability of the companies.
To analyze the factors determining the liquidity and …show more content…
Nevertheless, they provide some extreme useful information to the extent that the balance sheet shows the financial position on a particular date in terms of the structure of assets, liabilities and owner’s equity and so on, and the profit and loss account expose the results of operations for a certain period of time in terms of the revenue obtained and the cost incurred during the financial year. Thus the balance sheet and profit and loss account statement provides a summarized a view of the financial position and financial performance or operations of the firm. The analysis of financial statement is thus an important aid to financial