The relationship between liquidity and leverage of companies quoted at the NSE

Abstract

The objective of the study was to determine the relationship between liquidity and leverage of companies quoted at the NSE. The study considered thirty companies out of forty seven quoted firms at the NSE between 2006 to 2010. Secondary data was collected from the financial statements of individual companies and analyzed using multivariate regression analysis. The t statistics and F significance ANOVA were used to test the hypothesis. The findings revealed that there is negative insignificant relationship between liquidity and leverage. Firms adopt the best market practices by putting in place good working capital management practices and short cash conversion cycles. The study is in agreement with other studies done in developing countries that portray negative relationship between liquidity and leverage.