Articlehybrid2015

Liquidity Analysis of Selected Public-Listed Companies in Malaysia

Carl B. McGowan · N M Baki Billah · Noor Azuddin Yakob

17 citations0/0 files storedIssues in Economics and Business

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Financial Analysis and Corporate Governance Working Capital and Financial Performance Financial Distress and Bankruptcy Prediction

Abstract

The Statement of Cash Flows is a crucial part of financial reporting. Thus, cash flow ratios have drawn the attention of practitioners and academic researchers to use to evaluate the performance of a company. This study examines, over the three years (2010-2012) period, the liquidity position of selected companies from three prominent sectors (Consumer products, Industrial products and Trading/Services) of the Malaysian economy using cash flow statement ratios and traditional liquidity ratios suggested by various researchers. Traditional ratios were obtained from the Osiris database and cash flow ratios were calculated by using financial statements of selected companies. Traditional ratios examined were - current ratio, quick ratio, total asset to total liabilities ratio, and interest coverage ratio. Similarly, cash flow ratios examined were–operating cash flow ratio, critical needs cash coverage ratio, cash flow to total debt ratio, and cash interest coverage ratio. Correlation analysis was performed to investigate the strength of the relationship between traditional ratios and cash flow ratios. The empirical results of the correlation analysis show a statistically significant positive relationship between traditional ratios and cash flow ratios. Finally, pair t-tests results show that there is statistically significant difference between traditional ratios and cash flow ratios. The implication of the above empirical results suggests that traditional liquidity ratios should not be used solely for measuring liquidity since a company can have serious cash flow problems with positive liquidity ratios and increasing profits. Liquidity ratios developed using the statement of cash flows provide additional information or sometimes better insight on the financial strength or weakness of a company.

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2016Analysis of financial statements 1994The Incremental Information Content of Earnings, Working Capital from Operations, and Cash Flows 1987Cash Flow in Bankruptcy Prediction 1978Hospitality Management Accounting 1993Financial Management for the Hospitality Industry 2019Analysis of Financial Statements 1976Fundamental Accounting Principles 2001The role of cash flow information in predicting corporate failure: the state of the literature

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