Impact of Liquidity Ratio on Profitability

Dependent Variables

Return on Assets (ROA) = Net Profit Before Tax/total assets

Return on Equity (ROE) = Net Profit Before Tax/Shareholder’s Equity

Return on Investment (ROI) = Net Profit Before Tax/Investment

Independent Variables

Current Ratio = Current assets/Current Liabilities

Acid Test or Quick Ratio= Current assets-Inventories /Current Liabilities

Liquidity Ratio =Cash + Investment/ Current Liabilities

1.ROA=Return on Assets = 2.00241202676767 -0.888199450693355* Current Ratio=Current Assets/Current Liabilities

PeriodROA=Return

on Assets

Current Ratio=Current Assets/Current

Liabilities1991-1992 0.19 0.151992-1993 0.18 0.141993-1994 0.17 0.141994-1995 0.21 0.151995-1996 0.23 0.171996-1997 0.19 0.131997-1998 0.21 0.161998-1999 0.21 0.141999-2000 0.21 0.15

2000-2001 0.21 0.15

2001-2002 2.301.5

2002-2003 0.17 0.112003-2004 2.07 1.382004-2005 0.21 0.142005-2006 0.20 0.122006-2007 0.22 0.132007-2008 0.21 0.10

Summary for the independent and dependent variables:

Variables N Mean Standard deviation

ROA=Return on Assets 18 0.420 0.643

Current Ratio=Current Assets/Current Liabilities 18 1.781 0.497

Goodness of fit coefficients:

R (coefficient of correlation) 0.687

R² (coefficient of determination) 0.472

R²adj. (adjusted coefficient of determination) 0.439

SSR 3.709

Evaluating the information brought by the variables (H0 = Y=Moy(Y)):

Source DFSum of squares Mean square

Fisher's F Pr > F

Model 1 3.310 3.310 14.278 0.002

Residuals 16 3.709 0.232

Total 17 7.018

Model parameters:

Parameter ValueStandard deviation Student's t Pr > t

Intercept 2.002 0.434 4.616 0.000Current Ratio=Current Assets/Current Liabilities -0.888 0.235 -3.779 0.002

The equation of the model writes: ROA=Return on Assets = 2.00241202676767 -0.888199450693355* Current Ratio=Current Assets/Current Liabilities

Descriptive statistics:

N Mean Variance Standard deviation

ROA=Return on Assets 18 0.420 0.413 0.643

Current Ratio=Current Assets/Current Liabilities 18 1.781 0.247 0.497

Fisher's F test:

F (observed value) 1.673

F (critical value) 2.673

DF 1 17

DF 2 17

Two-tailed p-value 0.298

Alpha 0.05

Conclusion:At the level of significance Alpha=0.050 the decision is to not reject the null hypothesis of equality of the variances.

In other words, the inequality (Variance1 <> Variance2) is not significant.

Levene's test:

F (observed value) 1.085F (critical value) 5.499DF 1 1DF 2 34One-tailed p-value 0.305Alpha 0.05

Conclusion:At the level of significance Alpha=0.050 the decision is to not reject the null hypothesis of equality of the variances.

2. ROE=Return on Equity = 5.53704220993141 -7.57257036324705*Acid Test Ratio or Quick Ratio

Period ROE=Return on Equity

Acid Test Ratio or Quick Ratio

1991-1992 0.51 0.851992-1993 0.55 0.751993-1994 0.53 0.851994-1995 0.60 0.841995-1996 0.69 0.721996-1997 0.73 0.661997-1998 0.87 0.571998-1999 0.95 0.571999-2000 1.01 0.51

2000-2001 1.07 0.462001-2002 10.86 0.002002-2003 0.84 0.452003-2004 1.04 0.422004-2005 1.16 0.432005-2006 1.16 0.402006-2007 1.38 0.382007-2008 1.63 0.382008-2009 1.29 0.37

Summary for the Independent and dependent variable:

Variable N Mean Standard deviationROE=Return on Equity 18 1.493 2.359Acid Test Ratio or Quick Ratio 18 0.534 0.217

Goodness of fit coefficients:

R (coefficient of correlation) 0.697R² (coefficient of determination) 0.486R²adj. (adjusted coefficient of determination) 0.454SSR 48.637

Evaluating the information brought by the variables (H0 = Y=Moy(Y)):

Source DFSum of squares Mean square

Fisher's F Pr > F

Model 1 45.989 45.989 15.129 0.001Residuals 16 48.637 3.040

Total 17 94.627

Model parameters:

Parameter ValueStandard deviation Student's t Pr > t

Intercept 5.537 1.118 4.953 0.000Acid Test Ratio or Quick Ratio -7.573 1.947 -3.890 0.001The equation of the model writes: ROE=Return on Equity = 5.53704220993141 -7.57257036324705*Acid Test Ratio or Quick Ratio

Student's t test for independent samples / two-tailed test:

The test is computed under the assumption that the two theoretical variances are equal -0.175 to 2.094

t (observed value) 1.718t (critical value) 2.032DF 34Two-tailed p-value 0.095Alpha 0.05

Conclusion:At the level of significance Alpha=0.050 the decision is to not reject the null hypothesis of equality of the means.In other words, the difference between the means is not significant.