Does Liquidity or profitability influence firm financial distress most? Empirical Study on Manufacturing Companies listed in Indonesia Stock Exchange (2015-2019)
Boby Hera Sagita (a*), Nugraha (b), Boby Hera sagita (c**)

(a) Doctoral Student Universitas Pendidikan Indonesia
jl. Dr. Setiabudi No.229 Kota Bandung, Indonesia
* bobyhs.telkomu[at]gmail.com
(b) Professor Faculty of economics and business universitas Pendidikan Indonesia
jl. Dr. Setiabudi No.229 Kota Bandung, Indonesia
(c) Lecturer Faculty of industrial Engineering Universitas Telkom
jl. Telekomunikasi no.1 Terusan Buahbatu Kota Bandung
** bobyhs[at]telkomuniversity.ac.id

Abstract

This study aims to see how liquidity ratios and profitability ratios can predict the likelihood of financial distress and which ones have the most influence. This study took 7 (seven) ratios included in the category of liquidity ratios and profitability ratios. The object of this research was carried out in manufacturing companies listed on the Indonesia Stock Exchange in 2015-2019 with a sample size of 107. This study uses logistic regression, because financial ratios do not have to be normal if used and more than that, logit can predict the percentage of accuracy. The results showed that the ratio of working capital to total assets and the ratio of net income to equity dominated the contribution in determining financial distress. And the overall accuracy percentage is 88.9%.

Keywords: Financial Distress, Liquidity ratio, profitability ratio

Topic: Financial Management and Accounting