Accounting Measures of Corporate Liquidity, Leverage, and Costs of Financial Distress

Teresa A. John

Financial Management, 1993, vol. 22, issue 3

Abstract: Liquid assets such as cash and marketable securities constitute a considerable portion of total assets, say 6.3% to 9.6%, of manufacturing firms. Financial managers pay a lot of attention to the measurement and management of corporate liquidity. It has also been recognized that a consequence of severe shortage of liquidity is financial distress. This study analyzes the relationship of the costs of financial distress to the level of corporate liquidity maintained and leverage.

Date: 1993
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