The influence of financial indicators on liquidity: An empirical analysis of profitability, leverage, and fund age

Abstract

Financial leverage, profitability, and liquidity are crucial metrics used to evaluate the financial health and stability of a firm. This study aims to investigate the relationship between leverage ratios (debt-to-equity and debt-to-asset), profitability ratio( ROE), Fund Age and liquidity ratios (cash ratio and quick ratio) for Residential Real Estate Investment Trusts (REITs) listed on the New York Stock Exchange (NYSE) over the period of 2009-2021. A multiple linear regression analysis was conducted to model the relationship between the independent variables and the dependent variables. The findings suggest that ROE has a significant positive relationship with liquidity ratios, while Debt to Equity and Fund Age have a significant negative relationship. Debt to Assets is found to be not statistically significant in explaining liquidity, further highlighting the complex nature of the relationship between financial metrics and the financial stability of a firm.