Abstract
The relationship between profitability and liquidity is still controversial since many researchers obtain different conclusions from their studies. Besides, the Chinese market is getting more and more attention and profitability and liquidity are crucial for Chinese companies to keep operation management. Consequently, this thesis analyses the relationship between liquidity, company size, corporation growth and profitability of beverage companies in Chinese market between 2015 and 2017. Desk research can be used to getting the financial data published by the companies; the relationship was studied with the help of ratio analysis, horizontal analysis, description analysis, Pearson correlation coefficient and also a regression analysis. Surprisingly it was observed weak or insignificant positive correlation between liquidity, company size, corporation growth and profitability on the short run, contradicting the main literature. The conclusions are limited to the periods examined and the sample companies. Key words: Profitability, liquidity, Chinese beverage companies, Working capital, Current Ratio, Company Size and Corporation Growth DOI: 10.7176/RJFA/11-12-17 Publication date: June 30th 2020
Highlights
Wealth maximisation is a corporate goal which is virtually accepted by the whole world, with the exception of a few companies (Borad, 2018); profitability is the primary concern for corporations, internal users like managers and shareholders
The current ratio has a positive relationship with a return on assets that implies the profitability of a firm will grow, if the liquidity increases in 2016
This study experientially examines the affiliation between liquidity, company size, corporation growth and profitability, within a sample of 20 companies from the beverage sector in China
Summary
Wealth maximisation is a corporate goal which is virtually accepted by the whole world, with the exception of a few companies (Borad, 2018); profitability is the primary concern for corporations, internal users like managers and shareholders. Differing sizes of companies will bring different operational performances for top executives; it is an important factor for decision making. By analysing corporation growth we can predict corporation’s future development trends and development speed (Uyar, 2009). The relationship between profitability, liquidity, company size and corporation growth is still controversial since many researchers obtain different conclusions from their studies. The main target of this study is the empirical investigation of this controversial theory. The main question of the research is raised, which is: Is there a relationship between liquidity, profitability, company size and corporation growth?
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