Efficiency of Financial Ratios Analysis for Evaluating Companies’ Liquidity
DOI:
https://doi.org/10.23918/ijsses.v4i4p110Keywords:
Financial Ratios Analysis, Liquidity, Liquidity Ratios, Current Ratio, Quick RatioAbstract
This research mainly focused on the evaluation of the companies’ liquidity by using financial ratios analysis. One of the UK retail company has selected to be evaluated through analyzing their data which is available on their financial statements. Potentially, cash flow statement of this company has considered to be used for evaluating liquidity, because most of the important information for this purpose can be found in this statement. A hypothesis has been developed in which financial ratios analysis can help the investors to choose the company for purchasing their shares and it has been approved because the numbers indicated that liquidity is important as much as profit for attracting investors to purchase the company’s share owing to providing confidentiality for the company. More information has proposed in this research.
References
Acharya, V. V., Afonso, G., & Kovner, A. (2017). How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007. Journal of Financial Intermediation, 30, 1-34.
Allen, F., & Gale, D. M. (2017). How should bank liquidity be regulated?
Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589-609.
Avramov, D., Chordia, T., & Goyal, A. (2006). Liquidity and autocorrelations in individual stock returns. The Journal of Finance, 61(5), 2365-2394.
Bolek, M., & Wolski, R. (2012). Profitability or liquidity: Influencing the market value-The case of Poland. International Journal of Economics and Finance, 4(9), 182.
Boudoukh, J., & Whitelaw, R. F. (1993). Liquidity as a choice variable: A lesson from the Japanese government bond market. The Review of Financial Studies, 6(2), 265-292.
Brunnermeier, M. K., & Pedersen, L. H. (2008). Market liquidity and funding liquidity. The Review of Financial Studies, 22(6), 2201-2238.
Castiglionesi, F., Feriozzi, F., & Lorenzoni, G. (2017). Financial Integration and Liquidity Crises (No. w23359). National Bureau of Economic Research.
Chang, B. (2017). Adverse selection and liquidity distortion. The Review of Economic Studies, 85(1), 275-306.
Chen, Z., & Lu, A. (2017). A market-based funding liquidity measure.
Chordia, T., Roll, R., & Subrahmanyam, A. (2008). Liquidity and market efficiency. Journal of Financial Economics, 87(2), 249-268.
Disatnik, D., Duchin, R., & Schmidt, B. (2013). Cash flow hedging and liquidity choices. Review of Finance, 18(2), 715-748.
Edmister, R. O. (1972). An empirical test of financial ratio analysis for small business failure prediction. Journal of Financial and Quantitative Analysis, 7(2), 1477-1493.
Fernandez, P. (2007). Valuing companies by cash flow discounting: ten methods and nine theories. Managerial Finance, 33(11), 853-876.
Fong, K. Y., Holden, C. W., & Trzcinka, C. A. (2017). What are the best liquidity proxies for global research? Review of Finance, 21, 1355-1401.
Gowthorpe, G. (2011). Business Accounting and Finance. 3rd ed. Knowledge Works Global Ltd India: Brendan, George.
Grossman, S. J., & Miller, M. H. (1988). Liquidity and market structure. The Journal of Finance, 43(3), 617-633.
Grullon, G., Kanatas, G., & Weston, J. P. (2004). Advertising, breadth of ownership, and liquidity. The Review of Financial Studies, 17(2), 439-461.
Guerrieri, V., & Lorenzoni, G. (2017). Credit crises, precautionary savings, and the liquidity trap. The Quarterly Journal of Economics, 132(3), 1427-1467.
Hakim, F., Triki, F., & Omri, A. (2008). earnings quality and equity liquidity: Evidence from Tunisia. International Journal of Managerial and Financial Accounting (IJMFA), 1(2), 147-165.
Huberman, G., & Halka, D. (2001). Systematic liquidity. Journal of Financial Research, 24(2), 161-178.
Hurst, E., & Lusardi, A. (2004). Liquidity constraints, household wealth, and entrepreneurship. Journal of Political Economy, 112(2), 319-347.
Lagos, R., Rocheteau, G., & Wright, R. (2017). Liquidity: A new monetarist perspective. Journal of Economic Literature, 55(2), 371-440.
Noreen, E. W., Brewer, P. C., & Garrison, R. H. (2011). Managerial Accounting for Managers. McGraw-Hill Irwin.
Olagunju, A. A., & Olabode, O.S. (2011). Liquidity management and commercial banks’ profitability in Nigeria. Research Journal of Finance and Accounting, 2(7/8), 24-38.
Olagunju, A., David, A. O., & Samuel, O. O. (2012). Liquidity Management and Commercial Banks’ Profitability in Nigeria. Research Journal of Finance and Accounting, 2(7-8), 24-38.
Richardson, V. D., & Laughlin, E. J. (1980). A cash conversion cycle approach to liquidity analysis. Financial Management, 32-38.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Schwarz, K. (2017). Mind the gap: Disentangling credit and liquidity in risk spreads. Retrieved from https://repository.upenn.edu/fnce_papers/19.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 International Journal of Social Sciences & Educational Studies
International Journal of Social Sciences & Educational Studies applies the
Creative Commons Attribution-NonCommercial 2.0 Generic Licence (CC BY-NC 2.0)
