Abstract:
The purpose of this study is to investigate the impact of liquidity on profitability.
Efficiency of working capital management can be measured with cash conversion
cycle. Panel data analysis has been used for 10 manufacturing firms listed on
respective Colombo stock market in Sri Lanka. Data has been taken from financial
statements of respective companies* websites from 2008-2011. Hypotheses were
tested using multiple regression analysis and Pearson's correlation. It was found that
there is a negative significant relationship between receivable period and firm's
profitability. On the basis of overall analysis, it is the effort important to state that the
selected company always tries to maintain adequate amount of net working
capital in relation to current liabilities so as to keep a good amount of
liquidity the outhouse the study period.
