Liquidity and Profitability Analysis of State-Owned Enterprises in Kerala: A Case Study of The Kerala State Coir Corporation Limited., Alappuzha

Abstract

The link between liquidity and profitability has long been debated in corporate finance, with some describing it as a paradox: maintaining appropriate liquidity protects solvency. Still, prioritizing profitability may jeopardize it, whereas prioritizing liquidity risk exposes firms to profitability concerns. This paper examines this contradiction in the context of state-owned enterprises (State-Owned Enterprises), specifically the Kerala State Coir Corporation Limited. The study assesses the firm's liquidity status and profitability trends, as well as their interplay, using financial ratio analysis and secondary data gathered from annual reports over a specified period. The results show a substantial inverse relationship between liquidity and profitability, implying that excessive liquidity reduces profitability, while low liquidity jeopardizes short-term obligations. The findings provide empirical evidence of the liquidity-profitability conundrum in the operation of State-Owned Enterprises, emphasizing the crucial importance of balanced financial management. The study contributes to the literature on public enterprise finance by offering insights into how state-owned enterprises in Kerala can improve their financial performance by optimizing working capital utilization while maintaining profitability.