Liquidity and Profitability Trade-off in Pharmaceuticals and Chemicals Sector of Bangladesh

This study aimed to identify the relationship between liquidity and profitability in pharmaceuticals and chemicals sector of Bangladesh. To fulfill the objectives, 10 companies were selected from the concerned sector and annual reports of these companies were collected for the accounting period of 2005 to 2014. Current Ratio (CR), Quick Ratio (QR), and Working Capital Ratio (WCR) were used as the indicators of liquidity and Return on Assets (ROA), Return on Equity (ROE), and Return on Capital Employed (ROCE) were considered as the indicators of profitability. For analyzing the data, widely used statistical measurements i. e. correlation, regression and Spearsman`s rank correlation coefficient method were used. From correlation analysis, this study found positive relation of QR and WCR with ROA, ROE, and ROCE. But, from regression analysis, it was found that there was no significant association between liquidity and profitability in pharmaceuticals and chemicals sector of Bangladesh. Spearsman`s rank correlation coefficient method also made the same conclusion regarding this relationship.