Liquidity Ratios To Profitability: The Case Of Selected Branches Of Cooperative Bank Of Oromia, Oromia Regional State, Ethiopia

ABSTRACT Liquidity is a financial term that means the amount of capital that is available for investment. The liquidity ratio of the bank is imperative in Ethiopia. Although the liquidity ratio has been studied by some researchers but appreciable efforts have not been made on the sectors of cooperative banks. Therefore, the present study was carried out to investigate liquidity ratio of cooperative bank of oromia, selected branches in oromia. The quantitative research approach was employed to accomplish the objectives of this study. The secondary data were collected from eight selected branches of CBO that fulfill the criteria of the data availability from the financial statement during the study period from 2007-08 to 2013-14 G.C. Descriptive statistics model was used to analysis the panel data for the standard determinants of liquidity ratio. The results for regression cash and bank balance to total liability and liquid asset to demand deposit are a negative effect on the profit of the bank and also revealed that if the is variables increase it leads the bank branches to low profitability. Financial variable performance will be developed from the three broad perspectives: Assets Quality Ratio, Earning Capacity Ratio and Liquidity Ratio. To indicators of liquidity ratio includes: Cash and Bank Balances to Total Liabilities, Loans and Advances to Total Assets, and Liquid Asset to Demand Deposits. The beneficiaries of the results of this study was corporate finance academicians whose interest is in the area of liquidity ratio on the profitability of cooperative banks and also helps as a baseline for further studies and the bank managers to understand the liquidity ratio for the management of the banks in Ethiopia.