Liquidity – Profitability Relationship Analysed Once Again. The Case Of Poland

Abstract

In this article, a study on relationship between liquidity and profitability of an enterprise are presented. Besides traditional measures of liquidity and profitability, the analysis takes account also of dynamic measures, i.e. the cash conversion cycle and the economic value added. The authors demonstrated that the lack of cohesion in the theory in the case of statistical measures may result from the certain snapshot effect, whereas the analysis of dynamic measures allows the interpretation of ratios consistent with the theory. This article also presents EVA (Economic Value Added) as a financial ratio for the calculation of which not all accounting corrections proposed so far must be used.