The Examination of the Relationship between the Modern Liquidity Indexes and the Cash Flow Ratios with Firms Profitability (Financial and Market-based Measures)

Document Type : پژوهشی

Authors

Farzaneh Nassirzadeh

Amin Rostami

https://doi.org/10.22067/pm.v19i3.28549

Abstract

Appraising the profitability of the companies is very important in the decisions of
financial information users. In this study, the relationship between modern liquidity
indexes and cash flow ratios with profitability (financial and market-based
measures) are examined.
This study includes 108 companies of Tehran Stock Exchange during ٢٠٠١-٢٠٠٩.
The statistical method used to test the hypothesis is panel data approach; and three
models (based on the dependent variables) are estimated for each hypothesis. The
results show that modern liquidity indexes and cash flow ratios have correlation with
together but they have different information contents and they can not be substitutes
for each other and presenting both of ratios together will provide better results. In
addition the results from testing hypothesis show that modern liquidity indexes and
cash flow ratios (except the CFOTCL) have significant association with all
profitability measures (Financial and market-based measures) and can present a
good picture of profitability and firms return.

Keywords

Modern Liquidity Indexes

Comprehensive Liquidity Index

Cash Conversion Cycle

Net Liquidity Balance

Cash flow ratios

profitability

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