Company Performance and Financial Distress in Automotive and Component Companies Listed on the Indonesia Stock Exchange

Abstract

One of the company's efforts is to avoid financial distress which can result in the closure of the company. The purpose of this study was to examine the effect of financial performance on financial distress. Financial distress is measured using Altman's discriminatory theory or often referred to as the Altman Z-score, while company performance consists of profitability as measured by return on assets (ROA), liquidity is measured by current ratio (CR), leverage is measured by debt to equity ratio (DER). ), and sales growth. The population of this study were 13 automotive and component companies listed on the Indonesia Stock Exchange (IDX) and 12 companies were taken as a sample because one company had incomplete data. Hypothesis testing using multiple regression analysis with a significance level of 0.05. The results showed that profitability (ROA) and liquidity (CR) had a positive and significant effect on financial distress, while leverage (DER) had a significant but negative effect on financial distress. Other results show that free cash flow and sales growth have no significant effect on financial distress.