FINANCIAL RATIO EFFECT TO CORPORATE BANKRUPTCY

Abstract

Company bankruptcy is a phenomenon that often occurs in the business world, be it caused
by external factors or internal factors. It would be better for companies to be able to analyze
predictions earlier in order to avoid insolvency and prevent unwanted things. Companies can
assess the condition of the company in its activities by paying attention to its financial flows
and making decisions in planning to maintain the company so that the company can survive
and compete. The purpose of this research is to predict the tendency of the Corporate
Bankruptcy condition using the Altman Z-score method and to analyze the effect of financial
ratios on bankruptcy. The independent variable is Corporate Bankruptcy and the dependent
variable consists of the Liquidity Ratio, Solvency Ratio, and Profitability Ratio.Data used in
this study is secondary data, namely financial reports from textile and garment companies
listed on the Indonesia Stock Exchange for the period 2015-2019. The results of this study are
the liquidity ratio has an effect on bankruptcy, while the solvency ratio has significant effect
and the profitability ratio has effect on bankruptcy. The suggestion for this research is that the
company is expected to be able to analyze the risk of bankruptcy earlier and evaluate the
financial performance and assets, in addition, it is hoped that further researchers can use other
methods as a comparison or prove that the Altman method is the best method in predicting
bankruptcy.