Examination of the Relationship between Internal and External Liquidity and the Capital Cost

The cost of capital is important as a criterion for making investment decisions, creating the optimal capital structure, measuring the performance indicators and declining the future liquidity to determine the value. The provided funds are used in the assets with the hope to gain efficiency. A company works optimally when the efficiency of the company is more than its costs. Therefore, the cost of capital is the minimum rate of return that gaining it is essential to maintain the value of the company. Given the importance of liquidity of the company assets in order to reduce the cost of capital, especially in the financial crisis, the impact of this factor is examined on the cost of company capital. The managers should have enough information about the cost of capital, which is often called the minimum expected rate of return for the items such as taking decisions for capital budgeting, establishing optimal capital structure and so on. The required information in this research is extracted from the text of the audited financial statements and explanatory notes of the companies listed in Tehran Stock Exchange for the years 2010 to 2014. The time period of the research consists of 5 consecutive years from 2010 to 2014 and the research sample includes 195 companies listed in Tehran Stock Exchange. The method of hypotheses testing in this study is the panel data which is done by using software EVewis8 and according to the output of the software, the significance of the relationships between variables is investigated. The results of testing the research hypotheses suggest that a liquid market for real assets increases the operational flexibility and also the ability to create cash.