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A Comparison of Static Measures of Liquidity to Integrative Measures of Financial and Operating Liquidity: An Application to Restaurant Operators and Restaurant Franchisors

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dc.contributor.authorCanina, Linda
dc.contributor.authorCarvell, Steven A.
dc.date.accessioned2020-09-12T21:14:32Z
dc.date.available2020-09-12T21:14:32Z
dc.date.issued2008-01-01
dc.description.abstractThe results presented in this paper show that integrative financial and operating measures of liquidity provide investors and creditors with information beyond that provided by static measures of short-term liquidity such as the current and quick ratios. Using a sample of restaurant firms over the period 1994–2003, our analysis shows dynamic measures of liquidity provide a drastically different view of short-term solvency than those produced from the static measures. Static measures of liquidity imply that restaurant companies are not liquid. However, when evaluated under this integrative framework, restaurant companies were shown to be more liquid than their current and quick ratios implied. Thus, financial analysts, creditors, and managers should evaluate both static and dynamic liquidity measures when evaluating the short-term financial liquidity and short-term credit worthiness of firms. In addition, careful attention should be paid to both financial and operating measures of liquidity to establish what changes, if any, have occurred in a company's liquidity position over time. This is an important finding for managers and investors in all industries, since short-term illiquidity implies a high risk of default if the banks refuse to refinance all or part of the debt. This in turn may affect the cost of short-term financing and result in an impact on their overall financing costs and required returns from equity investors.
dc.description.legacydownloadsCarvell8_A_Comparison_of_Static_Measures_of_Liquity.pdf: 1723 downloads, before Aug. 1, 2020.
dc.identifier.other5145034
dc.identifier.urihttps://hdl.handle.net/1813/72474
dc.language.isoen_US
dc.relation.doihttps://doi.org/10.1080/10913211.2008.10653847
dc.rightsRequired Publisher Statement: © Taylor & Francis. Final version published as: Canina, L., & Carvell, S. A. (2008). A comparison of static measures of liquidity to integrative measures of financial and operating liquidity: An application to restaurant operators and restaurant franchisors. Journal of Hospitality Financial Management, 16(1), 35-46. Reprinted with permission. All rights reserved.
dc.subjectliquidity
dc.subjectrestaurant operation
dc.subjectrestaurant finance management
dc.subjectequity
dc.titleA Comparison of Static Measures of Liquidity to Integrative Measures of Financial and Operating Liquidity: An Application to Restaurant Operators and Restaurant Franchisors
dc.typearticle
local.authorAffiliationCanina, Linda: lc29@cornell.edu Cornell University
local.authorAffiliationCarvell, Steven A.: sac20@cornell.edu Cornell University

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