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Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa

Author

Listed:
  • Omar Durrah

    (Department of Management and Marketing, College of Commerce and Business Administration, Dhofar University, Salalah, Sultanate of Oman)

  • Abdul Aziz Abdul Rahman

    (Department of Accounting, Faculty of Administrative and Financial Sciences, Philadelphia University, Amman, Jordan)

  • Syed Ahsan Jamil

    (Department of Accounting and Finance, College of Commerce and Business Administration, Dhofar University, Salalah, Sultanate of Oman)

  • Nour Aldeen Ghafeer

    (Department of Accounting, Faculty of Administrative and Financial Sciences, Edlep University, Edlep, Syria)

Abstract

The study aims to examine the relationship between liquidity ratios and indicators of financial performance (profitability ratios) in the food industrial companies listed in Amman Bursa during the period (2012-2014). The study sample included (8) industrial companies which operate in the field of food listed in Amman bursa. The results showed no relationship between all liquidity ratios and the gross profit margin, while there is a weak positive relationship between the current ratio and each of the operating profit margins and the net profit margin, as the study pointed to the existence of a positive relationship between (quick ratios, defensive interval ratio) and operating cash flow margin. There is a positive relationship between liquidity ratios (current ratio, quick ratio, cash ratio) and return on assets

Suggested Citation

  • Omar Durrah & Abdul Aziz Abdul Rahman & Syed Ahsan Jamil & Nour Aldeen Ghafeer, 2016. "Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 435-441.
    • Handle: RePEc:eco:journ1:2016-02-10
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    References listed on IDEAS

    as
    1. Achsania Ruziqa, 2013. "The impact of credit and liquidity risk on bank financial performance: the case of Indonesian Conventional Bank with total asset above 10 trillion Rupiah," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 6(2), pages 93-106.
    2. Dimitri Vayanos & Jiang Wang, 2012. "Liquidity and Asset Returns Under Asymmetric Information and Imperfect Competition," The Review of Financial Studies, Society for Financial Studies, vol. 25(5), pages 1339-1365.
    3. Afia Akter & Khaled Mahmud, 2014. "Liquidity-Profitability Relationship in Bangladesh Banking Industry," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 2(4), pages 143-151.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Linda Puspita SARI & Anggita Langgeng WIJAYA, 2022. "Financial Liquidity of Indonesian Manufacturing Companies before and during the COVID-19 Pandemic," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 3(1), pages 61-72, January.
    2. Kah Chon, Ooi, 2019. "Impacts Of Firm-Specific Factors And Macroeconomic Factors Against Microsoft’S Performance," MPRA Paper 97254, University Library of Munich, Germany, revised 15 Nov 2019.
    3. Jayeola OLABISI & Dauda Adewole OLADEJO & Jonathan Funminiyi ADEGOKE & Matthew Adekunle ABIORO, 2019. "Credit Management Policy And Firms’ Profitability: Evidence From Infant Manufacturing Firms In Southwest, Nigeria," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 4(4), pages 59-69.
    4. Samsuri, Nurhazimah, 2017. "Affin Bank Performance: Relationship Liquidity Ratio, Leverage Ratio and GDP to Profitability," MPRA Paper 78545, University Library of Munich, Germany.
    5. Retno Martanti Endah Lestari & Wahyudin Zarkasyi & Ida Farida, 2020. "The Influence of Biological Asset Accounting Policies and Corporate Governance Practices on the Financial Performance: Moderating Role of Knowledge about Renewable Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 615-622.
    6. Samar Issa & Gulhan Bizel & Sharath Kumar Jagannathan & Sri Sarat Chaitanya Gollapalli, 2024. "A Comprehensive Approach to Bankruptcy Risk Evaluation in the Financial Industry," JRFM, MDPI, vol. 17(1), pages 1-21, January.
    7. Robin van Emous & Rytis Krušinskas & Wim Westerman, 2021. "Carbon Emissions Reduction and Corporate Financial Performance: The Influence of Country-Level Characteristics," Energies, MDPI, vol. 14(19), pages 1-19, September.
    8. Kuan, Xin Yi, 2019. "Liquidity Risk of Pharmaniaga Berhad Under Firm Specific and Macroeconomics Factors," MPRA Paper 97161, University Library of Munich, Germany.

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    More about this item

    Keywords

    Liquidity; Financial Performance; Profitability; Food Industrial Companies; Amman Bursa; Jordan;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other

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