1. Impact of Liquidity Ratio on Profitability of the Licensed
Commercial banks in Sri Lanka
Miss. Thunsiya Ratheeswaran
Department of Financial Management
University of Jaffna
thunshiya.r@gmail.com
Miss. Thanushiya Thiyakarajah
Department of financial Management
University of Jaffna
thanusiya.thiyakaraja@yahoo.com
Miss.Saseela Balagobei
Department of Financial Management,
University of Jaffna
E-mail: saseelas@yahoo.com
T.P No: +94779687100
Abstract
The main purpose of this study is to examine the relationship between liquidity ratio and
profitability of the licensed commercial banks in Sri Lanka. Liquidity and profitability are the
most important issues to determine the survival of every organization. This study covered 20
licensed commercial banks in Sri Lanka over a period of last 3 years from 2010 to 2012. The
study is based on the secondary data collected from their annual reports and websites.
Correlation and regression analyzes were used in this study. Current ratio, quick ratio, return
on asset (ROA), return on equity (ROE), return on investment (ROI) were used to find out the
results. The findings of this research reveal that there is a significant relationship between
liquidity and profitability among the licensed commercial banks. Further this research
demonstrates that each ratio has significant impact on profitability of licensed commercial
banks. An organization should have the responsibility to maintain adequate liquidity due to
the liquidity greatly affects the profitability.
Keywords: Liquidity, Profitability, Return on asset, Return on equity, Return on investment