Impact of Liquidity Management on Financial Performance of Listed Manufacturing Companies in Sri Lanka

Abstract

The objective of this research is to examine the liquidity management and its impact on financial performance of listed manufacturing companies in Sri Lanka. Secondary data was used for the purpose of study. Ten years of data were collected from the annual reports of listed manufacturing companies. The data were analyzed by using the software STATA for the descriptive statistics and inferential statistics. The current ratio, quick ratio and interest coverage ratio are engaged as dimension of liquidity and earning per share and net asset value per share as dimension of financial performance. The study confirmed that current ratio and interest coverage ratio has a positive impact on earnings per share while quick ratio has a negative impact on earnings per share of listed manufacturing companies. Further, current ratio and interest coverage ratio has a positive impact on net asset value per share. Therefore, overall empirical results show that liquidity management has an impact on financial performance. The findings suggest that the listed manufacturing companies should try to optimize current assets and interest coverage to boost the financial performance of the companies. The further studies can be directed by adding different segments and countries