Analysis of Liquidity Management and Trade Off Between Liquidity, Risk and Profitability at Garden Silk Mills Ltd: An Empirical Study

The study is based on different measures to assess the qualitative efficiency of liquidity management and liquidity, risk and profitability trade off. It reveals that the overall performance regarding liquidity management at Garden Silk Mills Limited was good from the creditors’ point of view but to the management's point of view, it reflects bad financial planning and inefficient tie up of funds. The company maintained an adequate amount of overall liquid funds during the period of study but it has not proper investment in every quantum of working capital. Its investment in current assets in relation to total assets revealed the moderate approach of the company. Although the behaviour patterns of the different indices indicate the fair liquidity management of the company, yet a few suggestions have been offered to improve certain factors like reduction in loan and advanced through maintaining its optimum level, prompt recovery of debts, maintain a definite proportion among the various components of working capital on the basis of past experience and strengthening the cash position through collecting properly what is outstanding. The correlation between liquidity and profitability indicates that there is mild but not exact relationship between the liquidity and profitability. The correlation between risk and profitability of the company reveals that there is a positive association between risk and profitability. It has been found that liquidity and risk both were related to profitability, reflecting quite favorable effect of liquidity and risk on profitability. Therefore management of the Garden Silk Mills Limited should maintain its liquidity position through skillful liquidity and risk management.