THE IMPACT OF COVID-19 ON THE COMPANY'S LIQUIDITY

The Covid-19 pandemic has seated a new frame and new challenges in the business sector. The companies are faced with a possible economic shutdown because the Covid-19 is putting pressure on companies' business performance from all sectors, directly impacting revenues, profitability, and liquidity. Under pandemic Covid-19, many companies have lower revenue, resulting in less cash flow and delayed receivables collection. Companies' liquidity suddenly becomes very challenging across the globe as the coronavirus pandemic rapidly escalates. Companies can operate in the short term without profitability, but they are doomed to bankruptcy without liquidity immediately. Cash flow is crucial in pandemic days, so companies should manage cash in the best possible way to ensure liquidity. The importance of cash flow has also been recognized by governments that have intervened with various measures, especially for liquidity, to help companies overcome the Covid-19 situation. The fundamental question is whether the Covid-19 pandemic has significantly affected its liquidity, so this research aims to answer this question. To explore the Covid-19 correlation with the company's liquidity ratios, the data was taken from the Zagreb Stock Exchange website (www.zse.hr), where we collected data for 19 companies. Selected companies are included in the official stock index of the Zagreb Stock Exchange, Crobex, as of September 8. Sample periods cover the second and third quarters of 2020, comparing with the second and third quarters of 2019. Then we explore the relationship between companies' liquidity ratios from Crobex with the level of Covid-19, which we measure by Covid-19 number of infected people. So the research objective was to explore if the number of infected people in Croatia from Covid-19 had a statistically significant impact on its liquidity. The results show that an increase in NFD/EBITDA ratio negatively and statistically significantly affects the current liquidity ratio. In contrast, an increase in the number of infections from Covid-19 quarterly has a positive impact on the current liquidity ratio.