Published Online:July 2024
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:
Author Name:Mayurakshi Ojah and Mridul Roy
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:19
India’s economic growth is closely associated with its energy demand, and the oil and gas industry fulfills this demand. The importance of this industry is such that it influences the decisions of many other sectors of the Indian economy. The volatility of this industry makes it necessary to analyze the liquidity position by assessing the impact of prices on the availability of liquid resources. Liquidity analysis pertains to how quickly the assets of a company can be converted into cash to meet its current obligations so as to ensure financial stability and creditworthiness. Inability of a firm to meet its short-term responsibility is likely to result in bad credit rating as well as a decrease in the goodwill of the firm in the market. Therefore, the present paper analyzes the liquidity position of oil and gas industry by making a comparative study of selected public sector undertakings (PSUs) and private companies in India for the period 2016-17 to 2020-21. The results reveal that Oil India Ltd., ONGC and Vedanta Ltd. (Cairn Oil and Gas) have a better liquidity position than IOCL and Nayara Energy.
Liquidity refers to the assets of a firm that can be easily converted into cash to meet its current or future obligations. In other words, it pertains to the ability of a firm to raise cash whenever needed. Some assets are liquid, meaning that it can be easily converted into cash in a short period of time, while other types such as long-term investments may take a longer period of time to be converted into cash—and if such an asset has to be sold very quickly due to unavoidable circumstances, the company may end up losing some of the asset’s value. A study of liquidity is of utmost importance to both internal and external analysts because of its close relationship with day-to-day operations of a business (Bhunia, 2007).