ANALYSIS FACTOR OF FINANCIAL DISTRESS: AN EVIDENCE OF CABLE SUB SECTOR IN INDONESIA FROM YEAR 2016-2017

Abstract

Every company’s goal is to maximize its profit, however, with the downturn in 2015 economy, many companies around the world including Cable subsector companies in Indonesia are wondering their future in 2016-2017, whether they can cope financially or at worst they can fall into financial distress. The purpose of this study is to analyze the factor affecting financial distress in the Cable Sub Sector in the Indonesia Stock Exchange. This method of the study is descriptive using quantitative data from cable sub-sector companies that are listed on the Indonesia Stock Exchange namely Sumi Indo Kabel (IKBI), Jembo Cable Company (JECC), KMI Wire and Cable (KBLI), Kabelindo Murni (KBLM), Supreme Cable Manufacturing and Commerce (SCOO), Voksel Electic (VOKS) with an observation period of  2 years, from 2016-2017. The variables of the study are solvability and liquidity as the independent variable and Financial Distress Altman model as dependent variables. Descriptive statistic, correlation, significant test, and regression are used in the analysis of the data. The results show that solvability ratio averaged above 30% minimum debt standard, the liquidity ratio is averaging above 1 which shows its ability to pay short term debt. And in terms of Financial Distress, Altman Model shows that companies are solvent since the result above the standard 1.81 given. The results showed that there was a significant relationship between Solvency and liquidity towards financial distress with a significant value of 0.000 < 0.05 using F-test. The result also shows that out of the two factors analyzed, liquidity is important for the regression model in explaining the variation of bankruptcy potential with significant value at 5%, and solvability is significant at 10%. Thus, the study suggests that the company need to evaluate and monitor its liquidity and debt level in order to avoid distress condition.