Liquidity and Profitability of Selected Qouted Agricultural and Agro-Allied firms In Nigeria

Otekunrin, A. O. and Nwanji, T. I. and Olowookere, Johnson Kolawole and Lawal, A. I. and Oye, Olubukoye Opeyemi and Agba, Dominic Zann and Falaye, Adebanjo Joseph and Awonusi, Frank (2018) Liquidity and Profitability of Selected Qouted Agricultural and Agro-Allied firms In Nigeria. In: 32nd International Business Information Management Association Conference.

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Abstract

Achieving equilibrium between profitability and liquidity continued to be a source of concern to the company’s financial managers. Most of the extant studies has been done before the adoption of International Financial Reporting Standard (hereafter referred as IFRS) in Nigeria. Due to the mixed results from these extant studies, this subject area remains open for further studies. Since the adoption of IFRS in Nigeria, the relationship between liquidity and profitability is still not well known. The study is aimed at finding out the relationship between liquidity [proxied by quick ratio (QR), current ratio (CUR), cash ratio (CAR) and cash conversion cycle (CCC)] and profitability measured by return on asset (ROA) of quoted agricultural and agro- allied companies Nigeria since adoption of IFRS in 2012 to 2016. The study covered the 15 listed agricultural and agro –allied companies in Nigeria between the periods of 5 years from 2012 to 2016. The study used E-views 9.0 under which the regression analysis was used in the analysis and findings of the study which suggest that there is a positive significant relationship between liquidity and profitability of listed agricultural and agro –allied companies in Nigeria. It showed that there is a positively significant relationship between cash conversion cycle and profitability measured by return on asset. This study found out that there is a positively insignificant relationship between quick ratio, current ratio and cash ratio and the profitability of listed agricultural and agro –allied companies in Nigeria. The study recommends that managers should increase length of cash conversion period (account receivable) for listed agricultural and agro-allied companies by increasing the length of time to pay their debtors and decreasing the length of time of account payable. KEYWORDS: Profitability, Liquidity, Agro-allied companies and stock exchange

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