What is it about?
his research delves into the relationship between a bank's ability to access cash quickly (liquidity) and its profitability, using Bank Muscat in Oman as a case study. We looked at various financial measures like how much cash the bank holds in reserve, its ratio of deposits to assets, and its overall financial health. The results showed that certain measures of liquidity, like the ratio of liquid assets to total assets, had a significant impact on the bank's profitability. However, other measures didn't show as clear a relationship. We also found that the bank's capital adequacy ratio had a notable negative effect on both its return on assets and return on equity. By using advanced statistical models, we were able to explain a large portion of the variation in profitability using these liquidity and financial indicators. Our recommendations include improving liquidity management, strengthening capital reserves, and regularly monitoring deposit-to-asset ratios to better manage risk. Future research in this area could compare different banks or regions, use more advanced statistical techniques, and explore other factors affecting the relationship between liquidity and profitability.
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Why is it important?
Understanding the relationship between a bank's liquidity and its profitability is crucial for both academics and practitioners in the banking sector. Our study sheds light on the complex interplay between these factors, providing valuable insights that can inform financial management strategies for banks not just in Oman, but globally. By optimizing liquidity management and capital reserves, banks can improve their financial stability and performance, ultimately benefiting shareholders, customers, and the wider economy. Additionally, our research highlights the need for further investigation into this topic, paving the way for more nuanced understanding and better-informed decision-making in the banking industry.
Perspectives
As the author of this publication, I believe that our research makes a significant contribution to the field of banking and financial management. By uncovering the relationship between liquidity and profitability at Bank Muscat, we provide actionable insights that can help banks across the globe enhance their financial performance and risk management practices. Personally, I find it rewarding to contribute to the advancement of knowledge in this important area, and I am excited about the potential impact our findings can have on shaping future financial strategies in the banking sector.
Diana Fernandez
University of Technology and Applied Sciences, Nizwa
Read the Original
This page is a summary of: Optimizing Financial Performance: Deciphering the Interplay of Liquidity and Profitability in Bank Muscat, Sultanate of Oman, INTERNATIONAL JOURNAL OF SCIENTIFIC RESEARCH IN ENGINEERING AND MANAGEMENT, February 2024, Indospace Publications,
DOI: 10.55041/ijsrem28562.
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