Assessment of the relationship between liquidity and unprofitability of companies in preventing their bankruptcy

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In 2020, due to the COVID-19 pandemic, a moratorium was imposed on launching bankruptcy proceedings for enterprises in Ukraine. It was canceled in 2022 because of the war to encourage the company management to improve the efficiency of liquidity and solvency management, seeking ways to increase companies’ profitability and reduce the probability of bankruptcy. The study aims to determine the impact of liquidity on unprofitability, which can be considered an element in the management decision-making system to prevent bankruptcies of Ukrainian companies. The correlation-regression analysis was based on statistical data from Ukrainian companies for 2012–2019 and 2013–2020. The study found practically no connection between the unprofitability of Ukrainian companies and the decrease in the number of court cases in which a decision was made to recognize the bankruptcy of Ukrainian companies. On the other hand, there is a strong connection between Ukrainian companies’ liquidity and unprofitability. The constructed regression equation is statistically reliable and characterized by a high level of adequacy to real economic processes and phenomena. An increase in the general liquidity ratio by 1% leads to an increase in the unprofitability of Ukrainian companies by 0.0346%. According to the company size construct, the most substantial connection is recorded for medium-sized companies (the correlation coefficient is 0.927, the coefficient of determination is 0.860, and the built correlation-regression equation is characterized by statistical reliability and adequacy). In contrast, large, small, and micro enterprises have a weak and moderate connection.

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    • Figure 1. The algorithm for detecting the impact of liquidity on the level of company’s unprofitability
    • Figure 2. Dynamics of the unprofitability of Ukrainian companies in 2013−2020
    • Table 1. Dynamics of growth (decrease) in the level of corporate bankruptcies in 2008‒2020 by individual countries of the world in % from the previous year
    • Table 2. Calculated value of the general liquidity ratio for all functioning companies of Ukraine according to their size
    • Table 3. Relationship between the unprofitability of Ukrainian companies (Y) and the level of decrease in the number of court cases in which a decision was made to recognize the bankruptcy of Ukrainian companies (х)
    • Table 4. Relationship between the unprofitability of Ukrainian companies (Y) and the general liquidity ratio for all functioning companies of Ukraine (х)
    • Table 5. Relationship between the unprofitability of Ukrainian companies (Y) and the general liquidity ratio for all functioning companies of Ukraine (х) according to their size
    • Conceptualization
      Rodion Poliakov, Ivan Zayukov
    • Formal Analysis
      Rodion Poliakov, Ivan Zayukov
    • Funding acquisition
      Rodion Poliakov
    • Investigation
      Rodion Poliakov
    • Resources
      Rodion Poliakov, Ivan Zayukov
    • Software
      Rodion Poliakov
    • Validation
      Rodion Poliakov, Ivan Zayukov
    • Writing – review & editing
      Rodion Poliakov, Ivan Zayukov
    • Data curation
      Ivan Zayukov
    • Methodology
      Ivan Zayukov
    • Project administration
      Ivan Zayukov
    • Visualization
      Ivan Zayukov
    • Writing – original draft
      Ivan Zayukov