Abstract:
This study aims to find out the relationship between liquidity management and working
capital management toward profitability of banks. The 2008 financial crisis caused by severe
liquidity problem faced by financial institutions had driven notable banks to bankruptcy
worldwide. In Indonesia, few banks had gone down because of the crisis, while most of them
suffer decreased profit. This study can give pointers to banks to increase their profit by
maintaining a good management of liquidity and working capital. Researcher studied 9 public
listed banks in Indonesia, using quarterly issued financial statements from 2008 – 2012.
Researcher applied multiple regression testing to find out the relationship between current ratio,
current asset to total asset ratio, current liabilities to total asset ratio and debt to total asset ratio
toward return on asset and return on equity. Researcher found out CR, CLTAR, and DTAR
significantly affect ROA, while ROE significantly affected by CLTAR.
