The Effect of Liquidity and Leverage on Performance: A Study of BSE Listed Companies
Published: 2025
Author(s) Name: Ranjit Kumar Paswan |
Author(s) Affiliation: Kazi Nazrul University, Asansol, Paschim Bardhaman, West Bengal, India.
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Abstract
The study represents an honest effort to investigate the effects of liquidity and leverage on Performance selected group of companies. The sample consists of thirteen companies from within energy sectors, mentioned on Bombay Stock Exchange. From 2009 to 2022, a fourteen-year span, data was collected from Capitaline database. The study considered Return on Assets Ratio (ROA) and Return on Equity Ratio (ROE) as the key financial performance indicators. Additionally, it considered Debt to Equity Ratio (DER), Current Ratio (CR), Long-Term Debt to Total Assets Ratio (LTDTA), and Quick Ratio (QR), as representation of Liquidity and Leverage variables respectively. To achieve the research objectives, various statistical tools including descriptive analysis, correlation and regression analysis were employed. The study’s findings reveal that higher liquidity as indicated by strong current and quick ratios, is associated with improved returns on both assets (ROA) and equity (ROE). Conversely, excessive leverage, measured by a high debt-to-equity ratio, negatively impacts ROA and ROE
Keywords: Firm performance, Leverage, Liquidity.
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