Liquidity and Financial Performance in Agricultural Firms listed in the Nairobi Securities Exchange in Kenya
Samuel Kanga Odalo; Dr. George Achoki, PhD

Abstract
Liquidity of the firm is a key determinant of the firm’s financial performance. This study sought to establish the effect of liquidity on the financial performance of listed agricultural companies in Nairobi Security Exchange in Kenya. Secondary data was extracted from the audited financial statements for the period 2003 to 2013 and analyzed using a pooled OLS model. Liquidity was measured using liquidity ratios while financial performance was measured by return on assets (ROA), return on equity (ROE) and earnings per share (EPS). The results indicated that relationship between liquidity and ROA is positive and significant (b1=0.014, p value, 0.001) and positive and significant with ROE (b1=0.017, p value, 0.002) but positive and insignificant with EPS (b1=0.019, p value, 0.974). The study confirms that liquidity as measured using liquidity ratio affects the financial performance of agricultural companies listed in NSE positively and significantly in relation to ROA and ROE.

Full Text: PDF