Reports of firms with working capital problems have been widespread in recent years, particularly since the Penn Central debacle, whose failure caused a genuine confidence crisis which spread rapidly throughout all segments of the financial markets. A survey of the literature produced little evidence which had sought to determine the impact of a company's liquidity position on the market price of its common stock. This study first laid a theoretical framework for explaining possible effects of various levels of liquidity on equity values. Then, four hypotheses were investigated:

1. A corporation's liquidity position has an identifiable impact upon investors' evaluation of a common stock.