The Analysis of Causes of Business Financial Distress

Abstract

Economic growth is one of the most striking phenomena of recent years. The global economy is considered to be powerful and powerful. Nevertheless, signs of the deteriorating financial condition of the state, the population and surrounding businesses must be perceived. Financial management of any company should not neglect examining the causes of financial distress from a microeconomic and macroeconomic perspective. At the same time, businesses do not look at these causes as separate events, but perceive their interconnectedness. The aim of this paper is therefore to detect, investigate and summarize the causes of corporate failure.

The Effect of Financial Ratio to Financial Distress Mediated by Profitability Ratio in PT Angkasa Pura II (Persero)

“…The dependent variablein this study is Financial Distress. Several studies, such as Dwijayanti (2010) (Restianti & Agustina 2018) (Michalkova et al, 2018) use different indicators to indicate the presence of financial distress. In this study, the difference between the value of Earning Per Share (EPS) this year and the previous year is used as a proxy of early detection of financial difficulties.…”

“…Many studies have stated that liquidity difficulties, relatively larger amounts of debt, and declining profits are one of the early signs of financial difficulties. (Michalkova, Adamko, & Kovacova, 2018); Restianti & Agustina, 2018;Dwijayanti, 2010).…”

“…Signs of financial distress can be read by stakeholders can result in shareholder concerns, higher debt interest rates as the company becomes riskier, customer rejection, and the worst consequence is bankruptcy (Brigham & Houston 2019). According to Michalkova, Adamko, & Kovacova (2018), financial distress is used in a negative connotation to describe the financial health of a company that is faced with a temporary lack of liquidity and difficulties resulting in failure to meet financial obligations within their payment terms and to meet their financial obligations, even when in this case, there may be many predictive models that have been developed at a certain time and in certain economic conditions. Restianti & Agustina (2018) had analysed the effect of financial ratios on financial distress for 40 companies whose shares have been listed on the Indonesian Stock Exchange for the period 2013-2015.…”

Pengaruh Likuiditas, Leverage, Dan Arus Kas Terhadap Financial Distress

“…Financial distress adalah kondisi perusahaan di mana jumlah kas operasi yang dimiliki tidak dapat digunakan untuk membayar utang, sehingga perusahaan harus memperbaiki kondisi tersebut. Berbagai penyebab dari financial distress dapat terjadi seperti dampak dari berbagai macam fenomena ekonomi makro dan mikro (Michalkova et al, 2018).…”

Financial immunity of companies from Indonesian and Shanghai stock exchange during the US-China trade war

“…If a firm's score is more than 0 (X > 0), then the firm is predicted to experience financial distress. According to Michalkova, Adamko, & Kovacova (2018), some of the causes of financial distress are as follows:…”