The Relationship Between Liquidity and Profitability Analysis of Life Insurance Companies in Nepal

Abstract

This study analyses the relationship between liquidity and profitability of life insurance companies in Nepal for the period from 2070 to 2074. The study covers 8 life insurance companies out of the 18 life insurance companies listed on the insurance Board of Nepal. The study used secondary data. Data and information have been collected from insurance board of Nepal and annual report of selected life insurance companies. To drive the result of the study; financials tools, descriptive statistical analysis, correlation analysis, multiple regression analysis were applied. Profitability was measure by ROA and ROE while liquidity measure by quick ratio and leverage ratio. The analysis has done using statistical package for social science SPSS software version 25. From the finding life insurance companies in Nepal holding too much liquidity but no stability. The study found out that there is a weak positive but insignificant relationship between liquidity and ROE, whereas there is a weak negative but insignificant relationship between liquidity and ROA. It is found that leverage ratio have significant positive impact on profitability (ROE). Whereas leverage ratio have a significant negative impact on profitability (ROA).