Onuaguluchi, Florence Ifeoma and Okwo, Ifeoma Mary (2022) Liquidity Management and Gross Earnings of Insurance Firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 10 (12). pp. 1-13. ISSN 2053-4086(Print), 2053-4094(Online)
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Abstract
The study appraised liquidity management and gross earnings of insurance firms in Nigeria. During the Covid-19 period, insurance firms were faced with the financial responsibility of indemnifying the numerous risks suffered by policy holders. To do so effectively, they need to be liquid enough so as to meet such indemnity demands as at when due. This affects their investment. Hence the study examines liquidity and gross earnings of insurance firms in Nigeria. Current ratio, cash ratio, and operating cash flow ratio is the independent variables of the study, while the dependent variable is profit for the year. The study adopted an ex-post-facto research design, covering the period between 2011 and 2020. Secondary data were extracted from the annual report and accounts of the sampled insurance companies. The correlation technique was used for the data analysis. In line with the specific objectives of the study which was to examine the relationship between current ratio, cash ratio, and operating cash flow ratio and profit for the year of insurance firms in Nigeria, it was revealed that current ratio has a positive and strong relationship with profit for the year of firms in Nigeria insurance subsector. Cash ratio has a negative and weak relationship with profit for the year of firms in Nigeria insurance subsector. The operating cash flow ratio has a positive and weak relationship with profit for the year of firms in the Nigeria insurance subsector. This implies that an increase in current ratio results in a significant increase in profit for the year of insurance firms in Nigeria. It is recommended therefore that insurance firms in Nigeria should strive to improve their current ratio. They can do this by reducing the personal draw on the business and by reducing the personal drawings on the business. They should reduce their propensity to hold cash. They should balance the trade-off between cash holding and profitable investment. They should make profitable investments and ensure that their liabilities are settled on time. Insurance firms should devise strategies to improve the cash they generate from operating activities. They can do this by improving their inventory, introducing electronic payments, etc.
| Item Type: | Article |
|---|---|
| Subjects: | H Social Sciences > H Social Sciences (General) |
| Depositing User: | Professor Mark T. Owen |
| Date Deposited: | 30 Nov 2022 13:22 |
| Last Modified: | 30 Nov 2022 13:22 |
| URI: | https://tudr.org/id/eprint/1242 |
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