AN EVALUATION OF LIQUIDITY AND PROFITABILITY OF SELECTED INDIAN COMPANIES IN THE CONTEXT OF IND AS ADOPTION

Liquidity and profitability are two correlated aspects linked with working capital management of a business organisation. Most of the earlier studies conducted in this area revealed that there exists a negative correlation between liquidity and profitability. However, in India, companies were using Indian GAAP (IGAAP) in preparation and presentation of their financial statements till 2016-17. Since then, adoption of Indian Accounting Standards (Ind AS) has been made mandatory in a phased manner replacing the earlier IGAAP. The new accounting and disclosure norm is said to have a significant impact on the reported values of net profit and net worth. In this context, the present paper is an attempt to evaluate the relationship between liquidity and profitability before and after adoption of Ind AS. The study uses secondary data obtained from annual reports of fifteen selected companies and comes to a conclusion that the said relationship pattern is different during the two periods. JEL Codes: C12, E10, G21, O11