The effect of financial leverage on the Company's operating liquidity (within the model GOEL)

Subject Areas : Financial engineering

kamran karimi ¹ , Shadi Shahverdiani ² , Afsaneh Naeemifar ³

1 - Master of Accounting, Department of Accounting, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran
2 - هیات علمی دانشگاه آزاد اسلامی واحد شهرقدس
3 - Assistant Professor, Department of Agricultural Economy, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran

Received: 2017-04-06 Accepted : 2017-05-26 Published : 2016-09-22

Keywords: Financial Leverage, Current ratio, cash flow conversion cycle, operating liquidity,

Abstract :

The main aim of the present study is to examine the effect of financial leverage on operating liquidity in listed companies of Tehran Stock Exchange. Statistical population of the present study is consisted of companies listed on Tehran Stock Exchange during the time period of 2008 to 2014 and sample volume is equal to 118 companies by using screening method and after the elimination of outlaying observations. In this study, financial leverage was taken as independent variable in order to study its effect on current ratio, cash flow conversion cycle margin of the operational cash flow and return on assets. In this study, in which panel data with fixed and random effects were used, results obtained from firm data analysis by using multivariate regression at 95% confidence level indicated that financial leverage has a direct effect on return on assets. It was also indicated that financial leverage has a reverse effect on current ratio and cash flow conversion cycle. In addition financial leverage did not affect on the margin of the operational cash flow.