THE INFLUENCE OF LIQUIDITY ON THE PROFITABILITY OF COMPANIES IN THE PROCESSING SECTOR IN THE RURAL SERBIA

Bojan Stoiljković; Suzana Balaban; Milica Simić

doi:10.5937/Oditor2302155S

Authors

Bojan Stoiljković Alfa BK University, Palmira Toljatija 3, Belgrade, R. Serbia Author https://orcid.org/0000-0003-2796-8663
Suzana Balaban Alfa BK University, Palmira Toljatija 3, Belgrade, R. Serbia Author
Milica Simić Alfa BK University, Palmira Toljatija 3, Belgrade, R. Serbia Author

DOI:

https://doi.org/10.5937/Oditor2302155S

Keywords:

profitability, ROA, liquidity, panel analysis

Abstract

The subject of this paper is the examination of the impact of liquidity on the profitability of 100 companies in the processing sector of the Republic of Serbia with the highest level of business income in the period from 2016 to 2020. A regression with fixed effects was applied to the panel data. Based on the obtained results, it can be argued that there is no direct relationship between indicators of accelerated liquidity and net return on assets when it comes to the observed companies, which implies that the optimal amount of cash and cash equivalents that would enable the maximization of net return on assets cannot be determined either. There is no direct connection between profitability and the length of the business cycle of the observed companies. On the other hand, a faster turnover of capital results in a higher level of profitability, as well as the growth of company assets, while higher indebtedness has negative implications for the profitability of companies in the processing sector. The obtained results have significant implications for the decisions of financial managers, for the financial sector, as well as for competent state institutions.

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