Does the size matter? - comparison of the Cash ratio of the large and small seized firms

Cash ratio (Look Investopedia!)

(7-8 lines) The cash ratio The cash ratio is a measurement of a company’s liquidity. It specifically calculates the ratio of a company’s total cash and cash equivalents to its current liabilities. The metric evaluates company’s ability to repay its short-term debt with cash or near-cash resources, such as easily marketable securities. This information is useful to creditors when they decide how much money, if any, they would be willing to loan a company.

The cash ratio is most commonly used as a measure of a company’s liquidity. If the company is forced to pay all current liabilities immediately, this metric shows the company’s ability to do so without having to sell or liquidate other assets. The formula for a company’s cash ratio is:

\[Cash Ratio: Cash + Cash Equivalents / Current Liabilities\]

Data

The data originate from the web side Mendeley data and are a side-product of the research published by @stanivsic2020empirical. The data involve various primary and secondary data on the Serbian companies from the 2007-2015. They also include the data regarding the accontancy audits. The near explanation of the data presents the above given paper..(5-7 lines)… The current ratio is expressed as the share of \[AOP 0068 / AOP 0442\]

Hypothesis

We expect that large corporates are more able to repay their short-term debt with cash or near-cash resources, because they tend to hold cash as a precautionary measure. By generating enough cash, a business can meet its everyday business needs and avoid taking on debt. That way, the business has more control over its activities. In a situation in which a business has to take on debt to meet its expenses, it is likely that its debtors will have a say in how the business is run.

Our aim is to provide some graphical analysis explaining this fact. The following assignment will provide more advanced statistics. (as it is Your first step in data processing, I recommend You to use exactly the same kind of the analysis as me, but with other indicatiors - next time, we will extend our space for the other analysis significantly).

Data processing and results

udaje <<- read.csv2("udaje.csv")      # import of the .csv data to data.frame  
                                               # udaje become global - see operator <<-
#########   cleaning data - identification, where are the data missing 
library(Amelia)
missmap(udaje) 

udaje <<- na.omit(udaje)
missmap(udaje)

For continuing the analysis, the database needs even more reconstruction. First of all, we need exclude variables we do not need for achieving our goals. Inspecting the paper of @stanivsic2020empirical we decided to use just “AOP71”, “AOP68”,“AOP442” columns

selected.cols <<- c("AOP71", "AOP68", "AOP442")    #CHANGE
udaje.tmp <<- udaje[,selected.cols]

Error in `[.data.frame`(udaje, , selected.cols) : 
  undefined columns selected

udaje <<- data.frame(udaje.csv)
udaje.csv$cash.ratio <- udaje.csv$AOP68 / udaje.csv$AOP442        #CHANGE

Error in `$<-.data.frame`(`*tmp*`, cash.ratio, value = numeric(0)) : 
  replacement has 0 rows, data has 9549

# library
#library(ggplot2)      # highly popular library for plotting, however, I have not used it
                      # see https://r-graph-gallery.com/ to choose th3e plot and find an appropriate code

 

boxplot(udaje.tmp$cash.ratio[udaje.tmp$total.assets >= quart3], udaje.csv$casht.ratio[udaje2.csv$total.assets <= quart3], 
         names = c("Large firms", "Small firms"), # CHANGE
         ylab = "Cash.ratio", 
         main = "Figure")

We are not able to see, whether the boxex overlay, because of the oulier data. That is, why I decided to change the vertical axes scale in the graph as follows

boxplot(udaje.tmp$cash.ratio[udaje.tmp$total.assets >= quart3], udaje.tmp$cash.ratio[udaje.tmp$total.assets <= quart3], 
         names = c("Large firms", "Small firms"), # CHANGE
         ylab = "Cash.ratio", 
         main = "Figure",
        ylim = c(0,10))

Now, we clarly see that boxes (rectanles) overlay - ther is no difference between large and small firms if speaking about cash ratio.