Impact of Liquidity and Solvency on Performance of Chemical Sector of Pakistan

Abstract

The research project examines the impact of liquidity and solvency ratios specifically on the profitability of Chemical Sector of Pakistan, listed in Karachi Stock Exchange of Pakistan. This study is first of its kind in Bahria Universityat MBA level to incorporate liquidity, solvency and profitability ratiosinterest rate in the Correlation and Regression models. The analysis is done on the sample of 10 companies representing the chemical companies sector of Karachi stock exchange. The impact of liquidity and solvency ratioson profitabilityis analysed with the help of various statistical tools i.e. Correlation and Regression models, and common sample analysis. In this study Current Ratio, Quick Ratio and Debt Ratio, Debt to Equity Ratio and Interest Coverage as proxy for liquidity and solvency ratios respectively. The model revealed significance of liquidity and solvency ratioson the profitabilityof chemical sector stocks. Significance of liquidity and solvency ratios on the profitability for most of the company stocks has been proved with the exception of a few. The result showed that there is a positive and negative significance present between the liquidity, solvency and profitability ratios respectively