Does Liquidity Affect a Firm’s Profitability? A Case of Automobile Companies in India

The present study aims to examine the nature and strength of the relationship between liquidity and profitability and for that, all automobile companies listed in the BSE and NSE are selected. Accounting information for calculating the liquidity and profitability ratios of the selected companies has been extracted from the Annual reports of those companies for the period 2000-01 to 2019-20. Statistical tools like correlation and multiple regression have been applied to examine the nature and direction of the relationship between liquidity and profitability variables. The results of the multiple correlation techniques evidenced that there is no uniformity in the nature, strength, and direction of the relationship between liquidity and profitability ratios, and even the results of the multiple regression techniques evidenced that there is no uniformity in the output.