Influence of Liquidity and Profitability on Profits Growth of Nigerian Pharmaceutical Firms

https://doi.org/10.35912/gaar.v1i1.1318
Published: Nov 1, 2022

Abstract:

Purpose: This study sought to assess the influence of liquidity ratio and profitability ratio on profit growth of pharmaceutical firms in Nigeria.

Method: The researcher employed ex-post facto research strategy with a population of six (6) selected listed pharmaceutical firms in Nigerian stock exchange market. The study used 30 firm yearly observations from the six pharmaceutical firms listed in Nigeria.

Results: The results of the study revealed that the current ratio's liquidity ratio and the quick ratio's liquidity ratio had a statistically significant link with profit growth rate. The profit growth rate has no statistically significant link with the profitability ratio of net profit margin and return on asset.

Limitations: The discoveries of this study is limited to pharmaceutical firms in Nigeria and may not be adopted elsewhere.

Contribution: This study is anticipated to help pharmaceutical companies manage their cash and cash equivalents while also improving the performance of the business.

Keywords:
1. Liquidity ratio
2. Profitability ratio
3. net profit margin
4. return on asset
5. profit growth
Authors:
1 . Odukwu Victory Chika
2 . Eke Promise
3 . Igwoba Solomon U
4 . Egule Victoria Werikum
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How to Cite
Chika, O. V., Promise, E., U, I. S., & Werikum, E. V. (2022). Influence of Liquidity and Profitability on Profits Growth of Nigerian Pharmaceutical Firms. Goodwood Akuntansi Dan Auditing Reviu, 1(1), 1–13. https://doi.org/10.35912/gaar.v1i1.1318
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Issue & Section
Vol. 1 No. 1 (2022): November
Articles
References

    Abas, H., Kawatu, F. S., & Kewo, C. L. (2020). Analysis of profit growth of manufacturing companies listed on the Indonesia Stock Exchange (IDX) for 2013-2017 Period. International Journal of Applied Business and International Management, 72–78. https://doi.org/10.32535/ijabim.v0i0.878

    Abubakar, A. (2016). Financial leverage and financial performance: Evidence from the health care sector of the Nigerian stock exchange from 2005- 2014. ADSU Journal of Economics and Interrelated Disciplines, 1(2), 45- 64.

    Appah E., Onowu J. U., & Tonye Y. (2021). Liquidity and Profitability Ratios on Growth of Profits of Listed Oil and Gas Firms in Nigeria. African Journal of Accounting and Financial Research, 4(3), 1-14. DOI: 10.52589/AJAFR6NHPAYUO.

    Asian, A. U. (2015). Assessing the impact of liquidity and profitability ratios on growth of profits in Pharmaceutical firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 3(10), 97-114.

    Bassey, G. E., & Moses, C. E. (2015). Bank profitability and liquidity management: A case study of selected Nigerian deposit money banks. International Journal of Economics, Commerce and Management, 3(4), 1-24.

    Chibuike, U. C., & Celestine, A. E., (2022). Effect of Cashflow Management on Financial Performance: Evidence from the Pharmaceutical Industry in Nigeria. African Journal of Accounting and Financial Research, 5(1), 1–13. https://doi.org/10.52589/ajafr-shmld3aq

    Duruechi, A .H. Ojiegbe J .N. & Otiwu K .C. (2016). Liquidity management measures and bank performance in Nigeria: An empirical analysis. European Journal of Business and Management, 6(17), 2435.

    Edem, D. B. (2017). Liquidity management and performance of deposit money banks in Nigeria (1986 – 2011): An investigation. International Journal of Economics, Finance and Management Sciences, 5(3), 146-161.

    Eke, P. & Odukwu, V. C. (2022). Value for money analysis and financial performance of manufacturing firms in Imo State. Mazedan International Business Review, 3(1), 1-7. http//mdl.mazedan.com/search_details.php?id=1901

    Elangkumaran, P., & Karthika, T. (2013). An analysis of liquidity, profitability and risk: A study of selected listed food, beverage and tobacco companies in Sri Lanka. International Conference, South Eastern University of Sri Lanka, 4(1), 1–7.

    Idowu, A. A., Essien, M. J., & Adegboyega, R (2017). Liquidity management and banks’ performance in Nigeria. Issues in Business Management and Economics, 5(6), 88-98.

    Innocent, E. C., Ikechukwu, A. C. & Nnagbogu, E. K. (2014). The effect of financial leverage on financial performance: Evidence of quoted pharmaceutical companies in Nigeria. IOSR Journal of Economics and Finance, 5(3), 17- 25.

    Kajola, S. O., Sanyaolu, W. A., Alao, A. & Ojunrongbe, O. J. (2019). Liquidity and profitability: Evidence from the Nigerian Banking Sector. Accounting and Taxation Review, 3(2), 1-12.

    Kehinde, O. P. (2013). An empirical investigation of the liquidity profitability relationship in Nigerian commercial banks. Journal of Economics and Sustainable Development, 6(4), 108-119.

    Klein, P. O., & Weill, L. (2022). Bank profitability and economic growth. Quarterly Review of Economics and Finance, 84, 183–199. https://doi.org/10.1016/j.qref.2022.01.009

    Kuria, J., & Omboi, B. (2015). Influence on the capital structure and the financial performance of investment and banking firms listed at Nairobi securities exchange Kenya. Prime Journal of Business Administration and Management (BAM), 5 (11), 1983- 1991Conference of Informatics and Management Sciences, 1(3), 247–251.

    Mohd, F. M. S., & Yasuo, H. (2013). Sales Growth, Profitability and Performance: Empirical study of Japanese ICT Industries with three Asean Countries. Interdisciplinary Journal of Contemporary Research in Business, 4(11)

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    Odukwu, V. C. & Eke, P. (2022). Financial information and performance of manufacturing firms in Nigeria. Mazedan International Business Review, 3(1), 8-13

    Onyimba, R. C., Ugwu, B. N., & Bassey, E. E. (2020). Impact of Receivable Management on selected Pharmaceutical Firms in Nigeria. Nigerian Journal of Banking and Finance, 12(1), 28–33. Retrieved from https://www.njbaf.com/images/2020_articles/Volume_12128-33_Onyimba_et_al.pdf

    Owolabi, S. A., Obiakor, R. T. & Okwu, A. T. (2011). Investigating liquidity-profitability relationship in business organizations: A study of selected quoted companies in Nigeria. British Journal of Economics, Finance and Management Sciences, 1(2), 11–29.

    Rahmawati, Y., & Hadian, H. N. (2022). The influence of debt equity ratio (DER), earning per share (EPS), and price earning ratio (PER) on stock price. International Journal of Financial, Accounting, and Management, 3(4), 289–300. https://doi.org/10.35912/ijfam.v3i4.225

    Septiani, N, Suryana, L. (2018). "Effect of Profitability, Firm size, Asset Structure, Business Risk, and Liquidity on the Capital Structure". E-Journal of Accounting, Udayana University, 22(3).

    Sitohang, D., & Siagian, H. (2021). Effect of profitability (ROA) and liquidity (CR) on profit growth in company’s Pharmaceutical sector IDX. Ekonomis: Journal of Economics and Business, 5(2), 439. https://doi.org/10.33087/ekonomis.v5i2.399

    Sultan, Y. (2021). Determinants of Bank Profitability. Jinnah Business Review, 9(2), 1–14. https://doi.org/10.53369/vzis3854

    Sutardjo, T. & Afriyani (2019). Effect of Liquidity and Company Size on Profitability and Company Value in Industry Banking in Indonesia Stock Exchange. Journal of Research in Business and Management, 7(6), 28-38

    Ubesie, M. C. (2016). The effect of capital structure on the financial performance of Nigerian quoted conglomerates. European Journal of Accounting, Auditing and Finance Research, 4(6), 61-69

    Uwalomwa, U. & Uadiale O. M. (2012). An empirical examination of the influence on capital structure and the financial performance of firms in Nigeria. Euro Economica Journal, 1(31), 57-65

    Valuereschiwati, R., Syahdina, A. & Handayani, S. (2020). Effect of Liquidity, Profitability, and Size of Companies on Firm. Value Utopía Praxis Latinoamericana, 25(6): https://doi.org/10.5281/zenodo.3987632

    Zygmunt, J. (2013). Does liquidity impact on profitability? A case of polish listed IT companies.

  1. Abas, H., Kawatu, F. S., & Kewo, C. L. (2020). Analysis of profit growth of manufacturing companies listed on the Indonesia Stock Exchange (IDX) for 2013-2017 Period. International Journal of Applied Business and International Management, 72–78. https://doi.org/10.32535/ijabim.v0i0.878
  2. Abubakar, A. (2016). Financial leverage and financial performance: Evidence from the health care sector of the Nigerian stock exchange from 2005- 2014. ADSU Journal of Economics and Interrelated Disciplines, 1(2), 45- 64.
  3. Appah E., Onowu J. U., & Tonye Y. (2021). Liquidity and Profitability Ratios on Growth of Profits of Listed Oil and Gas Firms in Nigeria. African Journal of Accounting and Financial Research, 4(3), 1-14. DOI: 10.52589/AJAFR6NHPAYUO.
  4. Asian, A. U. (2015). Assessing the impact of liquidity and profitability ratios on growth of profits in Pharmaceutical firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 3(10), 97-114.
  5. Bassey, G. E., & Moses, C. E. (2015). Bank profitability and liquidity management: A case study of selected Nigerian deposit money banks. International Journal of Economics, Commerce and Management, 3(4), 1-24.
  6. Chibuike, U. C., & Celestine, A. E., (2022). Effect of Cashflow Management on Financial Performance: Evidence from the Pharmaceutical Industry in Nigeria. African Journal of Accounting and Financial Research, 5(1), 1–13. https://doi.org/10.52589/ajafr-shmld3aq
  7. Duruechi, A .H. Ojiegbe J .N. & Otiwu K .C. (2016). Liquidity management measures and bank performance in Nigeria: An empirical analysis. European Journal of Business and Management, 6(17), 2435.
  8. Edem, D. B. (2017). Liquidity management and performance of deposit money banks in Nigeria (1986 – 2011): An investigation. International Journal of Economics, Finance and Management Sciences, 5(3), 146-161.
  9. Eke, P. & Odukwu, V. C. (2022). Value for money analysis and financial performance of manufacturing firms in Imo State. Mazedan International Business Review, 3(1), 1-7. http//mdl.mazedan.com/search_details.php?id=1901
  10. Elangkumaran, P., & Karthika, T. (2013). An analysis of liquidity, profitability and risk: A study of selected listed food, beverage and tobacco companies in Sri Lanka. International Conference, South Eastern University of Sri Lanka, 4(1), 1–7.
  11. Idowu, A. A., Essien, M. J., & Adegboyega, R (2017). Liquidity management and banks’ performance in Nigeria. Issues in Business Management and Economics, 5(6), 88-98.
  12. Innocent, E. C., Ikechukwu, A. C. & Nnagbogu, E. K. (2014). The effect of financial leverage on financial performance: Evidence of quoted pharmaceutical companies in Nigeria. IOSR Journal of Economics and Finance, 5(3), 17- 25.
  13. Kajola, S. O., Sanyaolu, W. A., Alao, A. & Ojunrongbe, O. J. (2019). Liquidity and profitability: Evidence from the Nigerian Banking Sector. Accounting and Taxation Review, 3(2), 1-12.
  14. Kehinde, O. P. (2013). An empirical investigation of the liquidity profitability relationship in Nigerian commercial banks. Journal of Economics and Sustainable Development, 6(4), 108-119.
  15. Klein, P. O., & Weill, L. (2022). Bank profitability and economic growth. Quarterly Review of Economics and Finance, 84, 183–199. https://doi.org/10.1016/j.qref.2022.01.009
  16. Kuria, J., & Omboi, B. (2015). Influence on the capital structure and the financial performance of investment and banking firms listed at Nairobi securities exchange Kenya. Prime Journal of Business Administration and Management (BAM), 5 (11), 1983- 1991Conference of Informatics and Management Sciences, 1(3), 247–251.
  17. Mohd, F. M. S., & Yasuo, H. (2013). Sales Growth, Profitability and Performance: Empirical study of Japanese ICT Industries with three Asean Countries. Interdisciplinary Journal of Contemporary Research in Business, 4(11)
  18. Nairobi, N., Ambya, A., Afif, F. Y., & Pratikno, D. D. (2022). Ownership rights and ASEAN-5 economic growth. Studies in Economy and Public Policy, 1(1), 1-13.
  19. Odukwu, V. C. & Eke, P. (2022). Financial information and performance of manufacturing firms in Nigeria. Mazedan International Business Review, 3(1), 8-13
  20. Onyimba, R. C., Ugwu, B. N., & Bassey, E. E. (2020). Impact of Receivable Management on selected Pharmaceutical Firms in Nigeria. Nigerian Journal of Banking and Finance, 12(1), 28–33. Retrieved from https://www.njbaf.com/images/2020_articles/Volume_12128-33_Onyimba_et_al.pdf
  21. Owolabi, S. A., Obiakor, R. T. & Okwu, A. T. (2011). Investigating liquidity-profitability relationship in business organizations: A study of selected quoted companies in Nigeria. British Journal of Economics, Finance and Management Sciences, 1(2), 11–29.
  22. Rahmawati, Y., & Hadian, H. N. (2022). The influence of debt equity ratio (DER), earning per share (EPS), and price earning ratio (PER) on stock price. International Journal of Financial, Accounting, and Management, 3(4), 289–300. https://doi.org/10.35912/ijfam.v3i4.225
  23. Septiani, N, Suryana, L. (2018). "Effect of Profitability, Firm size, Asset Structure, Business Risk, and Liquidity on the Capital Structure". E-Journal of Accounting, Udayana University, 22(3).
  24. Sitohang, D., & Siagian, H. (2021). Effect of profitability (ROA) and liquidity (CR) on profit growth in company’s Pharmaceutical sector IDX. Ekonomis: Journal of Economics and Business, 5(2), 439. https://doi.org/10.33087/ekonomis.v5i2.399
  25. Sultan, Y. (2021). Determinants of Bank Profitability. Jinnah Business Review, 9(2), 1–14. https://doi.org/10.53369/vzis3854
  26. Sutardjo, T. & Afriyani (2019). Effect of Liquidity and Company Size on Profitability and Company Value in Industry Banking in Indonesia Stock Exchange. Journal of Research in Business and Management, 7(6), 28-38
  27. Ubesie, M. C. (2016). The effect of capital structure on the financial performance of Nigerian quoted conglomerates. European Journal of Accounting, Auditing and Finance Research, 4(6), 61-69
  28. Uwalomwa, U. & Uadiale O. M. (2012). An empirical examination of the influence on capital structure and the financial performance of firms in Nigeria. Euro Economica Journal, 1(31), 57-65
  29. Valuereschiwati, R., Syahdina, A. & Handayani, S. (2020). Effect of Liquidity, Profitability, and Size of Companies on Firm. Value Utopía Praxis Latinoamericana, 25(6): https://doi.org/10.5281/zenodo.3987632
  30. Zygmunt, J. (2013). Does liquidity impact on profitability? A case of polish listed IT companies.