1.0 INTRODUCTIONThe measurement of the relationship between the liquidity and profitability, which is widely displayed in literature, has not given a clear answer to the question of this relationship, although in fact there is a fundamental theory mentioning that together with the growth of liquidity, profitability reduces. Changes in the current business model of the company also showed errors in the traditional profit ratio. For example, in the case of leased machinery, the ROA (Return on Assets) is completely unreliable due to the significant assets diminution. The weakness of ROE (Return on Equity) is that the firm must repay the main initial instalments of the contractual liability of the profit, resulting in the return on equity not solely to equity. The relationship between liquidity and profitability is complicated also because liquidity does not have a uniform nature. Liquidity may be represented by many ratios. Profit and profitability are two distinct terms. Profit implies as an outright measure of earning limit, while profitability is relative measure of earning limit. Profit is characterized by Iyer (1995) as “abundance of return over cost” (Nimalathasan, 2009) while profitability is characterized as “the capacity of offered investment to gain an arrival from its utilization’. The words profitability is made out of two words profit and capacity. The word profit has just been characterized yet the importance of profit varies as per the utilization and reason for the venture to gain the profits. In this way the word profitability might be characterized as the capacity of offered investment to procure an arrival from its utilization. Profitability proportions measure the company’s capacity to produce profits and focal investment to security analysis, investors, and financial specialists. Profitability is the essential measure of the general accomplishment of big business. The analysis of profitability proportions is imperative for the Shareholders, creditors, prospective investors, bankers. Profitability can be estimated in many contrasting however interrelated measurements. To start with there is the relationship of an association’s profits to income, that is, the remaining profit for the firm per deals dollar. Another measure, degree of profitability (ROI), relates profits to the investment required to create them. Investigation of wage is of key worry to investors since they determine income as dividends. Further, expanded profits can cause an expansion in showcase value, prompting capital gains by Dr. Munther Al Nimer, Dr. Rania Al Omari, (2015). Owolabi and Obida (2012) additionally characterized profitability as the capacity to make profit from all the business exercises of a venture. It quantifies management efficiency in the utilization of hierarchical assets in increasing the value of the business. Profitability might be viewed as a relative term quantifiable as far as profit and its connection with different components that can straightforwardly impact the profit. Profitability is the relationship of pay to some accounting report measure which shows the relative capacity to acquire pay on resources.A benefit is what is left of the revenue a business creates after it pays all costs specifically identified with the age of the revenue, for example, delivering an item, and different costs identified with the direct of the business exercises. Profitability is firmly identified with benefit, yet it is the metric used to decide the extent of an organization’s benefit in connection to the span of the business, additionally estimation of proficiency and at last its prosperity or disappointment. It is communicated as a relative and not a flat out, sum. Profitability can additionally be characterized as the capacity of a business to create an arrival on a venture in light of its assets in correlation with an elective speculation. Despite in the fact that an organization can understand a benefit, this does not really imply that the organization is productive. An organization to end up noticeably productive, pay must surpass costs. Costs can be characterized as the cost of assets utilized as a part of the exercises of a business. Benefits for the organization are controlled by breaking down what is left finished after costs are subtracted from add up to revenue. The common profitability ratio is used to analyzing a companies performance include;Gross profit margin (GPM), operating margin (OM), return on assets (ROA) , return on equity (ROE), return on sales (ROS) and return on investment (ROI).The assessment of profitability is usually done through the ROA (Return on Assets = Net Income / Total Assets) and ROE (Return on Equity = Net Income / Equity), which is the ultimate measure of economic success (Damilola, 2007).As indicated by Shim and Siegel (2000) bookkeeping liquidity is the organization’s ability to liquidate developing short-term obligation (inside one year). Keeping up satisfactory liquidity is considerably more than a corporate objective, it is a condition without which the coherence of a business is in danger.Liquidity is characterized by the relative straight forwardness, cost, and speed with which a benefit can be changed over into money (Bodie & Merton, 2000). The goal of liquidity management, in the expressions of Gallinger & Healey (1991), is ?to accommodate satisfactory accessibility and care of corporate funds under fluctuated monetary conditions keeping in mind the end goal to help accomplish the coveted corporate targets of investor’s riches maximization?. The management of Liquidity includes overseeing inventories, records of sales and payable, and money (Kishore, 2008). Liquidity Management alludes to all management choices and activities that impact the size and effectiveness of liquidity. It stresses the management of current resources, current liabilities and the relationship that exist between them. The impact of liquidity management includes arranging and controlling current resources and current liabilities in such a way, to the point that dispenses with the danger of the powerlessness to meet due short term obligations.Liquidity is a need for the survival of the firm. While contrasting liquidity and profitability, liquidity gets higher need. No firm will keep on existing on the off chance that it has no liquidity. Firms which don’t make profit might be dealt with as under standard however not having liquidity may stop to work over a period (Agarwal& Mishra 2007).An organization’s liquidity is its capacity to meet its short-term money related obligations. Liquidity proportions endeavor to quantify an organization’s capacity to pay off its short-term obligation obligations. Market liquidity alludes to the degree to which a market, for example, a nation’s stock market or a city’s land market, enables resources for be purchased and sold at stable costs. An organization with a low scope rate should raise a warning for speculators as it might be an indication that the organization will experience issues meeting its short-term money related obligations and therefore in running its everyday operations. Liquidity is essential for an organization on the grounds that as to assess ventures, and about the general money related circumstance, liquidity can be a vital factor. Essentially, liquidity is the capacity you need to change over any advantage into cash rapidly. It is additionally a capacity to purchase or offer a security without influencing the benefit’s cost.Liquidity is connected to the structure of assets because if there are more liquid of assets such as cash and its substitutes, it is lowering the risk of bankruptcy, and then we can say that the firm is more liquid. The liquidity impacts the financial cost. Growth risk level is a determinant of the market value, and the extent of influence of profitability and liquidity on the growth of the companies’ performance has been controversial. Percentages of returns to be taken into account are those needed by investors who can gain a more or less aggressive liquidity management policy which is related to the rate of return because the higher the expectations, the higher the risk as to the rate of return. 1.2 Problem Statement Malaysian plantation companies are facing many changes and challenges, and most notably provide liquidity as the decline in the level of liquidity of any company can be reflected negatively on the financial performance. This is so as a result of its inability to implement operational plans, considering that the financial performance is a specific scale for the success of the companies. Liquidity management and profitability are very important issues in the growth and survival of a business, and the ability to handle the trade-off between the two is a source of concern for financial managers. 2.0 REVIEW OF THE LITERATURELiquidity and profitability are the main measurements of the financial performance of corporate organizations. Liquidity ratio is employed to determine the ability of the companies to meet their short term maturing contracts. Profitability will be concerned with relative profitability and effectiveness on the usage of assets of a business, and profitability ratios indicate the firm´s ability to gain profit and return on investments. The ratios are indicators of good financial health and how effective the company is in managing its assets.2.1 Liquidity Liquidity is the amount of capital that is available for spending as well as for investment. Liquidity impacts on the profitability of the firm. Liquidity may be increasing or decreasing the firm’s profitability. If a firm has high liquidity then it shows a strong capital and profitability position of the company. (Shaheen, Muhammad, Muhammad Riaz, Mudasar and Muhammad Asif, 2015). Their results show that there is a significant relationship between cash, account receivable and profitability, but there is an insignificant relationship between cash and inventory. At the end, we also concluded that liquidity and its management is so important for firms to indicate and improve the profitability of sugar sector in Pakistan. By using liquidity variables, the firm can improve its profitability and also create a value for shareholders by decreasing the receivable accounts and inventory (Shaheen, Muhammad, Muhammad Riaz, Mudasar and Muhammad Asif, 2015). Several research studies have focused on the relationship between liquidity and profitability of the organizations. Studies have been conducted for a wide scope of countries, engaging various selected variables for the investigations on the purported theme. The overall results revealed that there is only one positive significant relationship between Return on Assets (ROA) and Current Ratio (CR) of the companies in Saudi Arabia. Further, it is indicated that there is insignificant relationship between the Return on Assets (ROA) and Quick Ratio (QR) & Cash Ratio (CHR) of the companies in Saudi Arabia. They found that for Return on Equity (ROE), there is insignificant relationship with the independent variables, namely, Current Ratio (CR), Quick Ratio (QR) and Cash Ratio (CHR) (Mohammed, Muhammad Nauman and Imran Khokhar, 2015). In a critical economy, efficient cash optimization is crucial to all firms. Cash is vital for organizations. Having a proper set of liquidity management policy and rules for the firms will increase earnings, and decrease uncertainty of firms’ insolvency and significantly develop its possibilities of survival. Compelling liquidity administration will empower an association to determine greatest. Liquidity administration is an idea that is accepting genuine consideration everywhere throughout the world particularly with the current money related circumstances and the condition of the world’s economy. The worry of entrepreneurs and directors everywhere throughout the world is to devise a procedure of dealing with their everyday operations while keeping in mind the end goal to meet their commitments as they fall due and increment profitability. It is on this note this examination is being completed to learn the connection amongst liquidity and profitability of organizations recorded on the Ghana Stock Exchange. (Emmanuel Opoku Ware, 2015).As stated by Waqas Bin Services and Mobeen Ur Rehman (2014), liquidity ratio is utilized to help liquidity administration in each organization in the type of current ratio and quick ratio with intentions that greatly affect the organization’s profit. Therefore, businesses have adequate liquid assets (Cash, Banks) in the direction of fulfilling the payment program by comparing the cash and near cash to the payment duty. The liquidity ratio works with cash and cash assets (on the whole called “current assets”) on the one hand, and the instant payment duty (current liabilities) on the other. Assets near cash are usually made up of indebted individuals from clients and inventory of finish products and materials that are not processed.2.2 Profitability Both profitability and liquidity are positively associated with each other. The cash conversion cycle, account receivables, and current asset ratios are all impacts on profitability of firms in the sugar sector of Pakistan in a positive, negative or moderated way. So, liquidity and profitability are both related with each other. This is because if one increases, the other decreases. When a manger has a strong liquidity position then he better utilize it to improve the organization’s profitability and performance. Ahmad Tisman and Adeel Akhtar (2016) stated that the most important profitability ratio is the return on asset (ROA). ROA shows the ability of bank asset to produce the profit. Another ratio is the return on equity (ROE). This ratio mentions the returns to shareholders on their equity. The next one is the return on Investment (ROI) where it measures the bank’s efficiency by using invested capital. When banking sectors grip adequate liquid assets, banks profitability would expand. Adequate liquidity supports the bank to lessen financial crises and liquidity risks. The bank can consume any possible unexpected shock wave produced by an unforeseen want for the reduction in liabilities or rise in assets side of the balance sheet. However, if liquid assets of the banks are detained extremely, the profitability of the bank could reduce. 2.3 Association among Liquidity and Profitability This study seeks to determine the correlation between current ratio and profitability as measured by return on assets (ROA), the correlation between Acid-test ratio and profitability as measured by return on assets (ROA) and the correlation between return on capital employed and profitability as measured by return on assets (ROA) as a dependant variable. The independent variable of the analysis is liquidity ratio, current ratio and return on capital. Return on assets ( ROA ) is an indicator of how profitable a company is relative to its total assets. ROA is how efficient management utilizing its resources in order to earn profit. Its formula is dividing a company’s annual earnings by its total assets, ROA is stated as a percentage. The return on assets (ROA) compares income with total assets (equivalently, total liabilities and equity capital). It can be interpreted in two ways. First, it measures management’s ability and efficiency in using the firm’s assets to generate operating profits. Second, it reports the total return accruing to all providers of capital (debt and equity), independent of the source of capital. ROE shows how much return a firm made in comparison to the total amount of equity of shareholders stated on the balance sheet. Return on Equity is an important measure for a company because it compares it against its peers. The comparison among return on equity and return on assets can be found in the denominators of each formula. The average total assets are the denominators of the return on asset formula, and the average of stockholder’s equity is the denominator for the return on equity equation. Assets shown on a balance sheet is stockholder’s equity plus liabilities. Therefore, the return on equity formula is the same as return on assets except that it does not include liabilities. The return on equity is utilized internally by a firm or can be applied by an investor to calculate how well the firm is turning an earning relative to its stockholder’s equity. The correlation between current ratio and profitability is as measured by return on assets (ROA) and for the ROE, the correlation between Acid-test ratio and profitability is as measured by return on assets (ROA), the correlation between return on capital employed and profitability is as measured by return on assets (ROA) (Victor Chunkwunweike, 2014) The study sample included industrial companies which operate in the field of food listed companies in Amman bursa. The profitability facts of Jordanian industrial food companies are represented by the dependent variable which is return on assets (ROA), gross profit margin and operating profit margin. Liquidity refers to the speed in the transfer of assets into cash while liquidity ratios primarily focus on the cash flows. Omar Durrah1, Abdul Aziz Abdul Rahman, Syed Ahsan Jamil3, Nour Aldeen Ghafeer 9 (2016) said that they are an indicator to measure a company’s ability to meet its short-term liabilities including current, quick ratio and cash ratio under the independent variable.