Meaning of Liquidity and Profitability

Liquidity is available of cash at the time needed at a reasonable cost. It is the capacity to meet the cash demand. In other words, the ability of a firm to meet its short-term obligation is known as liquidity. It is the status and part of assets which can be used to meet the obligation. Liquidity reflects the short-term financial strength of the business. The degree of liquidity depends upon the relationship between cash assets plus those assets which can quickly be turned into cash. In simple liquidity refers to the whole money stock at the economy. Therefore, in banking, liquidity is the capacity of the commercial banks to fulfill the demand of depositors for cash.

   

        Profitability is the net result at number of policies and decision. Every business organization has the objective of earning maximization profit. Profit has the objective of earning maximum profit. Profitability is related with the net profit of an organization with reference to different variables. Profitability reflects the efficiency of the business firms