Financial ratios analysis and companies' liquidity evaluation

Abstract

This study used financial ratio analysis to evaluate the companies' liquidity in the primary. One of the SME businesses has been chosen for evaluation based on the study of the data found on their financial statements. Since this statement contains the majority of the pertinent data for this purpose, it has been suggested that this company's cash flow statement be used for this purpose. The numbers showed that liquidity is as important as profit for attracting investors to purchase the company's shares because it provides confidentiality for the company, supporting the hypothesis that financial ratio analysis can help investors choose the company for purchasing their shares. More information has been proposed in this research.

The Effect of Profitability, Liquidity, Institutional Ownership, and Managerial Ownership on Capital Structure

“…Liquidity refers to a business's ability to convert assets into cash to meet short-term cash needs (Dirman, 2020). The greater the company's liquidity ratio, the greater its ability to fulfil its obligations, so its debt will be lower (Hussein et al, 2023). Companies that use external funding in debt must have CR with a higher proportion of cash than other current assets in the form of receivables and inventories.…”

The Effect of Cash Holding on Capital Structure of Companies Listed on the Indonesia Stock Exchange

“…In other words, capital structure is used as a management decision tool in considering and determining the company's long-term funding (Bates et al, 2009). The current ratio is a ratio used to measure liquidity ratios to assess the company's ability to pay short-term obligations (Hussein et al, 2023). The company can measure its ability to meet short-term obligations that are due immediately by measuring the amount of cash available to meet these obligations.…”