Using Financial Ratio for Financial Distress Detection: Evidence from Transportation Industry

Fauji Sanusi, Lintang Fidia and Intan Purbasari ()
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Fauji Sanusi: Universitas Sultan Ageng Tirtayasa, Management Department, Faculty of Economics and Business
Lintang Fidia: Universitas Sultan Ageng Tirtayasa, Management Department, Faculty of Economics and Business
Intan Purbasari: Universitas Sultan Ageng Tirtayasa, Management Department, Faculty of Economics and Business

A chapter in Proceedings of the International Colloquium on Business and Economics (ICBE 2022), 2022, pp 98-113 from Springer

Abstract: Abstract This study examines how financial indicators including liquidity (X1), leverage (X2), profitability (X3), and growth (X4) affect the ability of enterprises in the transportation sector to predict financial distress (Y) and list their stocks on the Indonesia Stock Exchange (IDX). The sample for the study consisted of transportation-related companies that were listed on the Indonesia Stock Exchange between 2013 and 2018. The sample for the study consisted of 15 companies. The data analysis technique used in this study is multiple regression analysis. The results of the study show that (1) a measure of liquidity called the current ratio (CR) has a significant and favorable effect on anticipating financial distress situations, and (2) a measure of leverage called the debt-to-equity ratio (DER) is not relevant for doing the same. (3) The chance of financial difficulties is positively and strongly connected with the profitability ratio as indicated by Return on Assets (ROA). (4) Sales Growth (SG)-based growth ratios are not effective at forecasting the development of financial problems.

Keywords: Liquidity (CR); Leverage (DER); Profitability (ROA); Growth (SG); Financial Distress (Z-Score) (search for similar items in EconPapers)
Date: 2022
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DOI: 10.2991/978-94-6463-066-4_11

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