Abstract:

In every economy, the construction sector contributes to the Gross domestic product has it is regarded as part of the major contributor. It is therefore important to observe how liquidity of the construction companies to ensure that there is optimal level of liquidity in all companies that makes up of the construction sector and ensure continuous profitability of the firms. Liquidity is therefore proxies by current ratio, acid-test ratio, sales growth and leverage as control variables, while return on equity was utilized as the dependent variable. This study utilized simple linear regression and it was evident that current ratio was significant and acid test ratio was significant. It is therefore recommended that the government should ensure that payments to construction companies are made promptly following contract award and should also monitor construction progress to defend against inflation and avoid liquidity crises that might harm economic growth.