THE IMPACTS LIQUIDITY ON FINANCIAL PROFITABILITY OF COMMERCIAL BANK OF ETHIOPIA

Abstract

Liquidity can be defined as the ability of a financial institution to meet all legitimate demands for funds and also the ability of bank to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses. the main objectives of this study intends to investigate the impact of liquidity on financial profitability of commercial bank as in General and to examine the impacts of liquidity ratio , capital strcacture , forign exchange rate , loan to deposit ratio , and bank size as spcifice obejective on the profitability of commercial banks as well as the problems of the study was attempt to investigate the trade of and what kinds of relationshipe exist between the above five variable in the context of CB.Thise research methodology was designed with in the country location because the commercial banks does not exist as specific location and to determine the relationship between profitability and its impact,as alogical reasoning it uses deductive reasoning rather than inductive because it depandes up on law and prenciples, also it shows cuase and effect relationshipe between profitability and its impact. The target population of the study comprise all Ethiopian commercial bank among this taken only 12 Banks as sample size based on the fitness their financial statements by using Non probability sampling and the study use explanatory research design with a quantitative research method by combining documentary analysis (structured review of documents). The panal data taken from the audited financial statements of the Bank, particularly balance sheet and income statements during 2012 to 2018. There were analyzed by the methods of correlation and regressions model.The major finding show Results of the regression model indicate that Liquidity ratio; capital stracture, bank size has positive significant impact on financial profitability. However, loan to deposit ratio shows negative impact & insignificant and finally forign exchange rate has an inverse relation with profitability with in significant impacts. finally As a resualt many researchers say that liquidity have inverse relation with profitablitie .But thise studies (the research) showed and conclude that, liquidity have positive and significant impact on financial profitability of commercial banks.