The Impact of Liquidity on Profitability of Ethiopian Commodity Exchange (ECX) Traders

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Addis Ababa University


The establishment and development of commodity exchange in an integrated manner, where key factors such as market information, grades and standards, contract enforcement, regulations, warehousing and others are also developed, is considered to be one of the institutional interventions that would enable the marketing system to function efficiently. Accordingly, the already established Ethiopia Commodity Exchange (ECX) is expected to help develop an efficient marketing system in the country. The main objective of this study was to assess the profitability and liquidity position of business organizations those trade in ECX trading platform as members through the use of different ratios. A panel data of 66 trading members with 5 years duration with a total of 330 samples was used. The data were entered, manipulated, organized and analyzed using STATAS software with version 13. A panel study was employed based on the secondary data collected through document review, with the profitability of the company as a dependent variable and current ratio, quick ratio, gross profit margin and net profit margin as explanatory parameters. The fixed effect model was used for the basic factors that can affect the traders’ profitability. Moreover, the result of the study reveals that current ratio and quick ratios have no impact on profitability but gross profit margin and net profit margin are significantly affecting the profitability therefore, ROA and profitability are positively correlated with a 0.05 level of significance. Therefore both gross and net profit margins lead to increase the profitability of the sectors.


A Theses submitted to the department of accounting and finance in Partial Fulfillment of the Requirement of the Degree of Master of Science in Accounting & Finance


Current ratio, Gross profit margin, Liquidity, Profitability