Examining the Economic Interaction between Liquidity and Firms’ Financial Performance: Evidence from

The economic interplay between liquidity and financial performance of manufacturing firms listed on the Ghana Stock Exchange was investigated in this study (GSE). The study's goal was to investigate the relationship between liquidity (as measured by the current ratio, quick ratio, and cash ratio) and financial performance (as measured by return on assets, return on equity, and return on capital employed), as well as the interactive effects on firm share value. For the study, data was taken from twenty-one (21) firms' audited and published annual reports from 2008 to 2019. The study used correlation analysis for relationship and ANCOVA modeling for interactive effects. The study found that there was a weak positive statistically significant relationship between return on assets and measures of liquidity; there was a weak positive statistically insignificant relationship between return on equity and measures of liquidity; there was a weak negative statistically insignificant relationship between return on capital employed and measures of liquidity. The study also found positive effects of liquidity and performance on share value. However, the magnitude of interactive effect of liquidity and firm’s performance was much higher that the single effects. Based on the findings, the study recommended among others that authorities in listed manufacturing firms in Ghana should try and maintain an ideal level of liquidity that can meet their firms’ operational needs

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