Taslim Hasan, Department of Business Administration, Bangladesh Islami University, Bangladesh

This study is an attempt to show the relationship between profitability and liquidity in Islamic banking industry in the perspective of Bangladesh. Profitability measuring variables- gross profit margin, earning per share, return on equity and return on assets are used in this study. On the other hand, current ratio, liquid assets ratio, snap liquidity ratio and short term borrowing ratio are used as liquidity variables. In this study all secondary data and SPSS 17.0 have been used to perform the correlation and regression analysis. Findings of the study shows the perfect negative correlation with at least one dependent variable and two independent variables with 5% significance level. The study reveals that the influencing determinants of profitability are snap liquidity ratio and Liquid assets ratio in Islamic banking business. It suggests the Islamic banking industry to make a trade off between liquidity and profitability as there exist an inverse relationship.

Keywords: Profitability, Liquidity, Trade off, Correlation and Regression Analysis

Suggested citation: Hasan, T. (2017).A study of the relationship between profitability and liquidity in Islamic banking industry in the context of Bangladesh. Skyline Business Journal, Volume 13, Issue 1, pp 14 -22.

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Hasan, T. (2017).A study of the relationship between profitability and liquidity in Islamic banking industry in the context of Bangladesh. Skyline Business Journal, Volume 13, Issue 1, pp 14 -22.