Practical GAAP Financial Statements for Investors: An Analysis of the Relationship Between a GAAP Company's Current Ratio and Its Corresponding Stock Market Price
School of Business
Primary Subject Area
Business Administration, Accounting
accounting, stock market
Cherry, Alonna, "Practical GAAP Financial Statements for Investors: An Analysis of the Relationship Between a GAAP Company's Current Ratio and Its Corresponding Stock Market Price" (2013). Senior Honors Theses. 343.
GAAP financial statements are an excellent way of providing comparable information to both investors and creditors. A gradually changing world causes their applicability to everyday financial decisions to be questioned. The AICPA implies a necessity for more pertinent reported information, and others advocate a study into this topic. This paper intends to launch into this research and provides a case study with the current ratio, one of the most basic ratios derived from information given in GAAP financial statements, and its relationship to yearly stock price changes in the New York Stock Exchange. The study concludes that there is no apparent relationship between the current ratio and the change in stock price.