FINANCIAL DISTRESS PREDICTED BY CASH FLOW AND LEVERAGE WITH CAPITAL INTENSITY AS MODERATING

Abstract

The level of financial distress is a condition where the company's finances are in an unhealthy state or crisis. This study aims to examine the effect of cash flow and leverage in predicting the level of financial distress which is moderated by capital intensity at PT. Indah Karya (Persero). The research method used is descriptive verification with a quantitative approach. To assess this research, the 2013-2017 Quarterly Financial Report is used. The results showed that cash flows has a negative and significant influence in predicting the level of financial distress, leverage (debt to asset ratio) has a positive and insignificant influence in predicting the level of financial distress, capital intensity has a negative and insignificant effect in moderating the effect of cash flows on the level of financial difficulty and capital intensity has a positive and insignificant influence in moderating the influence of leverage in predicting the level of financial distress. Simultaneously cash flow and leverage in predicting the level of financial distress which is moderated by capital intensity together - have a significant effect on the condition of the level of financial distress of PT. Indah Karya (Persero). Another result found in this study is that the capital intensity variable in moderating leverage has the strongest influence in predicting the level of corporate financial distress which is seen by using an assessment of total assets to sales and debt to asset ratio. With these results, the company can use it as an early detection in the face of financial distress. Keywords: CashFlow, Leverage, Capital Intensity, Financial distress