The Impact of Liquidity, Solvency on Profitability: An Analysis of Jordanian Pharmaceutical Industries Sector
Rania Al Omari
This study is attempted to explore the effect on profitability of liquidity and solvency in the pharmaceutical sector of Jordan. Profitability is considered to be one of the key metrics representing the performance of the management of its properties in profit generation, so as to maintain the company’s business continuity and its market share since an increase in profits can raise the company’s market share, thus leading to capital profits. The impact of management decisions regarding liquidity and solvency and their impact on operational processes and asset management. The Profitability ratios reflect the impact of liquidity and debt on operational results and assets management. The significance of this study stems from analyzing the country`s economic conditions, liquidity problems, and solvency risk and the impact of firms` profitability. For the period between 2005-2018, the data were collected from Amman Stock Exchange financial reports for the pharmaceutical sector. SPSS software has been used for data descriptive analysis procedures and hypotheses testing using simple linear regression test. The study concluded that profitability calculated by ROA (Return on Assets), as the dependent variable, has a negative relationship with liquidity calculated by CR (Current Ratio) and a positive relationship with solvency calculated by (DE) Debt/ Equity ratio. Both are the independent variables of this study. The researcher recommends the companies in the pharmaceutical Industries Sector to follow policies of liquidity to achieve balance between the performance indicators.