The Effect of Financial Ratio on Financial Distress in Predicting Bankruptcy

Supriyanto, Joko; Darmawan, Arif

doi:10.30871/jama.v2i1.727

Cited by 21 publications

(21 citation statements)

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“…High liquidity indicates a lot of unbalanced cash in an effort to generate profits, so that the profit earned becomes low. This result supports the findings of previous research done by Mas'ud and Srengga [11], and Supriyanto and Darmawan [16], but does not confirm the findings of Tan [14], Restianti and Agustina [9], and Lumbantobing [15] Lumbantobing [17] which revealed that profitability ratio significant negatively effects on the condition of financial distress.…”

Section: Earning Ratiocontrasting

confidence: 83%

The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange

Lumbantobing¹

2020

Proceedings of the 6th Annual International Conference on Management Research (AICMaR 2019)

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This study purposed to confirm the influence of financial ratios toward the possibility of financial distress in the listed manufacturing companies in the Indonesia Stock Exchange. Using a selected sample consist of 30 emitens with 90 units of analysis, the relationship between financial ratios and financial distress during the period of 2015-2017 was tested. The results revealed that the ratios of activity are not significantly affect the possibility of financial distress. Liquidity ratios significant negatively affect the possibility of financial distress. Furthermore, debt ratios and earnings ratios significant positively affect the possibility of financial distress. The research recommends that liquidity ratios and debt ratios are the best ratios that can be used to predict financial distress. The study also recommends that the earnings ratios associated with liquidity ratios be provided in financial statements in order for users to make informed decisions in case of financial distress conditions.

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Section: Earning Ratiocontrasting

confidence: 83%

The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange

Lumbantobing¹

2020

Proceedings of the 6th Annual International Conference on Management Research (AICMaR 2019)

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“…It indicates that positive influence is showed by this ratio toward financial distress. These results are persistent with [7] research results stating that the ratio of EBITTA positively affect financial distress. This variable also has a significance value of 0.000 which affects financial distress with the very significant effect.…”

Section: 6the Effect Of Ebitta Ratio On Financial Distressmentioning

confidence: 79%

“…His research used four ratios in the Altman Z-Score modification with the research conclusions point out that the four ratios had a positive influence on financial distress. [7] also examined the effects of four ratios in the Altman Z-Score modification model on financial distress and resulted that this ratio positively affected financial distress. This research is expected to provide confirmation and accurate illustration of how the effect of ratio of the Altman model on financial distress.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Financial Ratio (Altman Z-Score) on Financial Distress Prediction in Manufacturing Sector in Indonesia 2016-2018

Toly¹,

Permatasari²,

Wiranata³

2020

Proceedings of the 23rd Asian Forum of Business Education(AFBE 2019)

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This study tries to elaborate the possibility of financial distress in Indonesia public listed companies from manufacturing field. The manufacturing industry was chosen because of its position as a sector that held a significant contribution in the Indonesia industry as a whole. The test tool used to forecast bankruptcy was Altman Z-Score model which consisted of the ratio of net working capital / total asset (X 1 ), retained earnings / total assets (X 2 ), earnings before interest and tax / total assets (X 3 ), and book value of equity / total liabilities (X 4 ). This research also aimed to explain how each ratio affects financial distress. The total samples in this research were 139 companies during 2016-2018. The companies experiencing financial distress were 55 companies in 2016 and 2017, and 56 companies in 2018. Using the logistic regression test on SPSS 23, this research identifies that the four ratios in Altman Z-Score model had a positively affected the financial distress; with the ratio of retained earnings / total assets and earnings before interest and tax / total assets had the most significant effect.

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“…The agency theory discusses the relationship between the manager (which is known as agent) and the shareholders (which is the capital provider to the company managed by the agents) (Supriyanto and Darmawan, 2018). This relationship is shaped by individualistic and opportunistic interests by both parties.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…The aforementioned studies showed that consumer product companies in South East Asia are significantly affected by the financial crisis considering the decline in demand for non-essential goods. This current study adopts the purposive sampling technique where samples are determined based on certain criteria (Supriyanto and Darmawan, 2018). The cross section model is employed whereby more than one variable is collected at the same time.…”

Section: Sample Selectionmentioning

confidence: 99%

Impact Of Financial Information Fraudulence To Financial Distress In Malaysia.

Bakar¹

2021

TURCOMAT

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We investigate if Malaysian listed companies engaged in financial information fraud during financial distressed after two years of US subprime mortgage crisis.We also investigate the impact of financial information fraudulence in bankruptcy prediction and misclassification errors. This study used consumer product companies listed on the main board and the timeframe is from 2011 till 2015. The Altman Z score indicates that 37 out of 133 Malaysian consumer product companies are financially distressed. Meanwhile, the M score shows that 28 out of 224observations are engaged in financial information fraudulence. However, these results are relatively low because the samples are taken from the main board and fraudulence in their financial statements might be done in lower magnitude in order to avoid sanctions by the Security Exchange Commission. Logistic regression was used to measure the predicting accuracy. The result of the overall accuracy percentage slightly improved by 0.9 after eliminating fraudulent companies. The confusion matrix result i.e. before and after the removal of financial information fraudulent companies, the misclassification errors especially type one has improved. This finding satisfied objective three, whereby one of the reasons for the deterioration in financial distress prediction is due to the upward bias of financial information fraudulence.Governments, monitoring bodies, and all those involved in an insolvency process would benefit from this study.

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The Effect of Financial Ratio on Financial Distress in Predicting Bankruptcy

Cited by 21 publications

References 0 publications

The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange

The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange

The Effect of Financial Ratio (Altman Z-Score) on Financial Distress Prediction in Manufacturing Sector in Indonesia 2016-2018

Impact Of Financial Information Fraudulence To Financial Distress In Malaysia.

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