THE EFFECT OF LIQUIDITY RATIO ON THE PROFITABILITY OF PHARMACEUTICAL COMPANIES IN MALAYSIA AUTHOR: SITI

Abstract

The liquidity and profitability are two critical components in any organization to ensure its survivability and sustainability .It is essential for any firm to maintain its optimal level of liquidity in order to ensure its smooth operation and avoiding the financial distress that may lead to insolvency. The research undertaken on 5 public pharmaceutical companies in Malaysia using the data extracted from the audited financial statements for the period of ten years (2009-2018). The objective is to find the positive effect of the Liquidity ratio towards the profitability of the pharmaceutical companies and Current Ratio and Quick Ratio were selected as the independent variables and ROA and ROE represented the profitability as dependent variables. Correlation and regression analysis as well as the descriptive statistics were applied in the analysis and findings suggest that the liquidity ratios in terms of Current Ratio and Quick Ratio has no positive effect on the profitability as measured by ROA and ROE to the public listed pharmaceutical companies in Malaysia. It is concluded that based on the research undertaken, liquidity ratios did not affect the profitability and there is possibility that other variables may affect the profitability of the pharmaceutical companies in Malaysia. It is recommended that future study to be undertaken considering the limitations highlighted in this report.