Relationship between Cash Flow Statement and Liquidity Ratios: A Research on Borsa İstanbul SME Industrial Enterprises

Abstract

Purpose – In the study, it is aimed to determine whether there is a relationship between the cash flows expressed as liquidity criteria of the enterprises and the liquidity ratios, and if any, the level and direction of this relationship. Design/methodology/approach – The sample of the research consisted of 40 companies whose data can be accessed continuously, operating in the Borsa Istanbul SME Industry Index. The data related to the companies subject to the research were obtained from Borsa İstanbul and Public Lighting Platform official websites and made ready for analysis. Correlation analysis, panel unit root tests, panel regression analyzes and causality analyzes were performed to achieve the purpose of the research. Findings – As a result of the analysis, it has been determined that there is no statistically significant relationship between cash flows obtained from operating activities, investments and financial activities and liquidity ratios. In addition, according to the results of the panel causality analysis, it has been determined that cash flows are a cause of the current rate with two delays, but cash flow variables are not a cause of the cash rate. Discussion – As a results of the research, it has been revealed that the balance sheet and cash flow data should be evaluated together in order to reach more accurate results in the liquidity analysis.