Liquidity vs Profitability

Topics: Balance sheet, Generally Accepted Accounting Principles, Asset Pages: 4 (910 words) Published: June 6, 2012
Submitted By Jannatul Ferdousi ID: 091-11-724 Sec: A Working Capital Management. Daffodil International University. 1

There is a trade-off between liquidity and profitability; gaining more of one ordinarily means giving up some of the other. Liquidity means having enough money in the form of cash, or near-cash assets, to meet your financial obligations. Alternatively, the ease with which assets can be converted into cash. Profitability is a measure of the amount by which a company's revenues exceed its relevant expenses. It is obvious that excessively high levels of liquidity will not do any organization any excellent, particularly in the long run as such an organization may be losing out on worthwhile investment opportunities. Low liquidity levels may limit an organizations’ ability to respond to business emergencies. Low profitability levels may lead to slow speed of corporate growth and may even affect a firms’ market rating. One of the probable dangers of high profitability levels is that it can make a fake impression that an organization has fully matured and reached a comfort zone. The resultant effect is that the management of such enterprises ends up becoming less strategic, less proactive and thus prone to corporate drift. Corporate drift itself may end up leading to corporate failure.

Beximco Pharmaceuticals Ltd., commonly known as Beximco Pharma or BPL, is a leading manufacturer and exporter of finished formulations and active pharmaceutical ingredients (APIs) in Bangladesh. Beximco Pharma is the flagship company of Beximco Group, the largest private sector industrial conglomerate in Bangladesh, and remains the only Bangladeshi company with an AIM listing on the London Stock Exchange. The company employs more than 2,500 people and is widely acclaimed for its skilled and talented workforce. Its state-of-threat manufacturing facilities have been certified by the global regulatory bodies such as TGA (Australia), GCC (Gulf...
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