Impact of Liquidity Management on Profitability: A Case Study of Malappuram Co-Operative Spinning Mills Limited, Kerala

In this paper an attempt is made by the researchers to investigate the relationship between liquidity management and profitability. To achieve this objective the secondary data is retrieved from annual reports of Malappuram Co-Operative Spinning Mills Limited, Kerala for the period from 2006 to 2011. Selected financial ratios, Mootal's Comprehensive Test, Spearman's Rank Correlation and student‘t’ test was been applied to meet the objectives of the study. This study also aims to explore the impact of liquidity components i.e., Size of Working Capital, Current Ratio, Absolute Liquidity Ratio, Current Assets to Total Assets, Current Assets to Turnover Ratios, Working Capital Turnover Ratio, Debtors’ Turnover Ratio on profitability. The findings of this study are that the liquidity assets were not maintained sufficiently to meet the creditor's obligation, current assets were not maintain properly and finally the results of correlation revealed that there is a significant positive relationship between liquidity and firm's profitability. Thus the study concluded that the liquidity components were having high influence over profitability of any company.