RELATIONSHIP BETWEEN LIQUIDITY AND PROFITABILITY OF HOTEL BUSINESSES LISTED IN THE STOCK EXCHANGE OF THAILAND
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Abstract
This study is aimed to examine the relationship between liquidity and profitability of nine hotel businesses listed in the Stock Exchange of Thailand during 2000-2019 by employing the fixed effects and random effects regression analyses. Liquidity in this study is measured by two financial ratios, including the current ratio and the quick ratio; whereas profitability is measured by two ratios, including the return on assets ratio and the net profit margin. The findings reveal that both the current ratio and the quick ratio are positively related to the return on assets ratio. That is, one time increase in the current ratio and the quick ratio will lead to 1.305 and 1.301 percent increases in the return on assets ratio, respectively. On the contrary, the findings indicate that neither the current ratio nor the quick ratio is related to the net profit margin. However, it is reasonable to conclude that liquidity and profitability are positively related. Therefore, the appropriate liquidity management will help improve the company’s profitability.
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