The Effect of Liquidity Ratio, Solvency and Profitability on Financial Distress in Retail Trading Sub-Sector Companies
Tiar Lina Situngkir, Fety Nurlia Muzayanah*, Novian Ekawaty, Miftah Jiwa Nawwar Fauzan, Rina Maria Hendriyani

Universitas Singaperbangsa Karawang
Jl. HS. Ronggo Waluyo, Telukjambe Timur, Karawang, Jawa Barat, Indonesia - 41361
*fety.muzayanah[at]fe.unsika.ac.id

Abstract

Companies need to maintain their business to avoid financial distress which can result in business bankruptcy. The research aims to determine, analyze and explain the effect of liquidity ratios, solvency and profitability on financial distress. The analytical method used in this research is descriptive analysis and verification with a quantitative approach. The research was conducted at 10 retail trade sub-sector companies listed on the Indonesia Stock Exchange for the 2016-2020 period. The data analysis technique used is multiple linear regression analysis. The financial distress prediction results using the Z-Score method show 4 companies in the healthy category, 4 companies in the gray area category and 2 companies in the financial distress category. The results of the analysis show that partially the ratio of liquidity, solvency and profitability has a significant influence on financial distress. Simultaneously shows the ratio of liquidity, solvency and profitability have a significant influence on financial distress.

Keywords: Liquidity Ratio, Solvency, Profitability and Financial Distress

Topic: Financial Management and Accounting