Effects of Current Ration, Debt to Asset Ratio, and Return to Success on Financial Distress in Indonesia Stock Exchange

Dihin Septyanto; Nadia Figrita Welandasari

Dihin Septyanto Fakultas Ekonomi dan Bisnis Universitas Esa Unggul, Jakarta
Nadia Figrita Welandasari Fakultas Ekonomi dan Bisnis Universitas Esa Unggul, Jakarta

Keywords: Current Ratio, Debt to Asset Ratio, Return on Assets, Financial Distress, Altman Z-Score.

Abstract

This study aims to determine the effect of Current Ratio, Debt to Asset Ratio, andReturn on Assets on the Financial Distress Level (Z-Score Index) on textile andgarment companies listed on the Indonesia Stock Exchange in 2014 – 2018.The population is 17 textile and garment companies.The results showed thecoefficient of determination in the study amounted to 89.5%, while the remaining10.5% is explained by other variables outside the research not included in researchthat can affect the level of financial distress (Z-score index).The results also showed that simultaneously Current Ratio, Debt to Asset, and Returnon Assets significantly influence Financial Distress (Z-Score Index). Partially CurrentRatio has a significant positive effect, meaning that each increase in the value of thecurrent ratio then the magnitude of the Z-score index value also increases so that itwill reduce the level of the company's financial distress. Debt to Asset Ratio has asignificant negative effect, meaning that each increase in the value of debt to assets,the amount of Z-score index value will be reduced so that it will increase the level offinancial distress of the company. Return on Assets has a significant positive effect onFinancial Distress (Z-Score Index), meaning that every increase in the value of returnon assets affects the amount of Z-score index value also increases so that it willreduce the level of financial distress of the company.