Relationship Between the Liquidity and Profitability of Select Heavy Engineering Public Sector Companies

The main purpose of this study is to identify the relationship between short-term liquidity and profitability of the select Heavy Engineering Public Sector Manufacturing Companies in India. A well designed and implemented short-term liquidity management is expected to contribute positively to the creation of a firm's value. So, the business has to apply the optimum liquidity position to run the manufacturing and other operations smoothly. Managing the optimum liquidity position is crucial for the heavy engineering companies because of long operating cycle. Most of the fund will be blocked and unable to convert into cash in a short span of time. In general, heavy engineering companies' posses large inventory levels and they have to convert this inventory into cash in a short period. Three companies with thirty years data from companies' annual reports are selected for this study. Ratios are calculated and it analyzed by using multi-regression & ANOVA technique. The findings have shown a significant relationship between liquidity and profitability of select sample. The regression line found with this study is: