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The relationship between liquidity and solvency among firms in consumer sector

Yusoff, Hanaffie and Ahmad, Kamilah (2016) The relationship between liquidity and solvency among firms in consumer sector. In: International Conference on Humanities and Technology (ICOHAT 2016), 17-18 August 2016, Avillion Legacy Melaka Hotel.

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Abstract

Liquidity management is essential for any organization to ensure a smooth routine operation, particularly in the payment of debt. The most critical issue for large companies especially in consumer product sector that required a good level of liquidity. This is because liquidity is fundamental to ensure the stability of the company. Therefore, this study aimed to identify the relationship between the level of liquidity and the company's solvency. For this study, a total of 30 firms in the consumer product sector were used as sample. Data were derived from the financial statements as well as multiple regression analysis was used to analyze the data to see the relationship between the levels of liquidity of the company with solvency. The analysis showed a significant correlation between liquidity and solvency where the current ratio has a positive relationship with the debt ratio and debt to equity ratio and quick ratio has a negative relationship with the debt ratio and debt to equity ratio. The quick ratio results indicate that when the level of liquidity increased the company less dependent on debt. While a positive relationship through the current ratio reflect inventory turnover is relatively financed by debt as short-term debt that is usually a routine operation of most businesses in the consumer sector.

Item Type: Conference or Workshop Item (Paper)
Subjects: T Technology > T Technology (General)
Divisions: Faculty of Technology Management and Business > Department of Production and Operation Management
Depositing User: Mr. Mohammad Shaifulrip Ithnin
Date Deposited: 09 May 2017 07:33
Last Modified: 09 May 2017 07:33
URI: http://eprints.uthm.edu.my/id/eprint/8402
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