The Effect of Profitability, Liquidity, and Solvency on Financial Distress of Textile and Garment Companies in Indonesia (original) (raw)
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Financial Distress Analysis in an Indonesian Textile Company
2021
This research aimed to examine the health of textile companies by using the Altman Z-Score method. The Altman model is used to determine the effect on financial distress through Working Capital to Total Asset (WCTA), Retained Earning to Total Asset (RETA), Earning Before Interest and Tax to Total Asset (EBITA), Market Value of Equity to Book Value of Liabilities (MVEBL) and Sales to Total Asset (STA). The population in this study was textile companies for the period 2016-2019. The sample was 14 textile companies with a research time of 4 years resulting in 56 samples obtained by purposive sampling. The results indicated that WCTA, RETA, EBITA, MVEBL and STA had a simultaneous effect on financial distress, but they had no effect separately.
https://www.ijrrjournal.com/IJRR\_Vol.9\_Issue.11\_Nov2022/IJRR-Abstract61.html, 2022
Objective: The study is aimed to determine the occurrence of financial distress and its interconnections with leverage, liquidity and profitability in the listed textile companies of Bangladesh prevailing for the period of 2011 to 2021. Design/methodology: This empirical study is based on the secondary data. The data for this study is retrieved from the annual financial statements of textile companies listed in Dhaka stock exchange (DSE). The analysis examines 33 firms over a period of 11 years stretching from 2011 to 2021. Altman Z score model is used here as a barometer for assessing financial distress in Bangladeshi textile industry. Considering the financial distress as a categorical variable forward (stepwise) logistic regression model is used to address the association of leverage, liquidity and profitability with the financial distress. Results: Results of Z score confirmed that seventeen firms were in safe zone during the whole study period when nine firms showed a distressing tendency during the whole study period. Further the study concluded that liquidity (in model III) and profitability (in model II & III) have significant negative influence on the probability of financial distress. Where, leverage held significant negative influence on the financial distress throughout estimated model I, model II and model III. Significance: This study may be used as an effective tool for the firm's management, policy makers, stockholders, government and other interested parties of Bangladeshi textile industry. This study can serve as valuable evidence for firm's managers regarding any financial decisions or to detect early signal of financial distress. The revealed influences of leverage, liquidity and profitability on financial distress will serve as a benchmark for the managers to set up various controlling measures.
This research aims to investigate the impact of the current ratio (CR), debt to asset ratio DA), and return on assets (ROA) on financial distress. The measure of financial distress level is the Altman Z-score index. The sampling technique in studies is purposive sampling. The sample is 16 textile companies and 80 firm-year observations. The result of data analysis indicates that the current ratio (CR), debt to the asset (DA), and return on assets (ROA) significantly influence financial distress (Z-Score rating). The partially current ratio and return on assets positively affect financial distress (Z-Score Index). The debt to asset ratio has a significant negative effect on financial distress (Z-Score Index). The finding contributes to the company's management considering these three ratios in making business decisions to avoid financial distress. The originality of this study is the analysis of financial distress from the textile and garment industry in the Indonesian capital ma...
ABSTRACT : Financial distress is the stage of declining financial conditions that occurred before bankruptcy. To determine the risk of bankruptcy by knowing the signs of financial distress. Financial distress can analyze financial statements using financial ratios, namely liquidity, solvency and profitability. The purpose of this study was to examine the effect of liquidity, solvency and profitability on financial distress conditions. The population in this study were 30 consumer goods industrial companies. By using purposive sampling technique, 21 companies were obtained. Using 3 (three) years, 63 observations were obtained. Data analysis technique is logistic regression analysis with SPSS V.23 program. The results of this study indicate that liquidity and profitability have a negative and significant effect on financial distress conditions so that the hypothesis is accepted, but solvency has a positive and significant effect on financial distress conditions, this means rejecting the hypothesis. KEYWORDS: Liquidity, Solvency, Profitability, Financial Distress
2020
This research was aimed to find out determine the effect of liquidity ratios, profitability ratios, leverage ratios, and operating cash flow in predicting financial distress in manufacturing companies listed on the Indonesia Stock Exchange (2015-2018). Liquidity ratio, profitability ratio, leverage ratio, and operating cash flow as independent variables, while financial distress as independent variables The object used in manufacturing companies, the sample of 105 companies. Logistic regression analysis was used for the technique analysis of the data. The results showed that the ratio of liquidity and operating cash flow did not influence in predicting financial distress while the other two variables namely profitability ratios and leverage ratios had a very strong influence in predicting financial distress.
Universal Journal of Accounting and Finance, 2023
The purpose of this study is to examine the conceptualization of financial distress research in the textile and apparel industries, particularly in terms of research scope and methodology. Furthermore, this article attempts to systematically analyze the network formed by these literatures. In this study, a qualitative approach was used through the literature review method, with 41 specific articles about financial distress in the textile and garment sector serving as the research corpus and drawn from the Litmaps database. To interpret and describe the frequency patterns and relationships visualized using RStudio and Gephi devices, text mining, network analysis, and content analysis were used. This study discovers that a frequently discussed issue is the influence of financial variables, both dependent and independent, on the prediction of financial distress or vice versa, using various quantitative approaches and models of financial distress. This claim is supported by the findings of a systematic analysis, which reveals a positive correlation between global cloud output and network analysis. The corpus aspect of this research is limited, and the research scope is limited to the Indonesian context. Future research with broader literature sources and different types of company sectors is highly anticipated. This literature review can provide a comprehensive framework for researchers and practitioners who are interested in cases of financial distress. Furthermore, this is a recent study that conducts a systematic review of the literature on financial distress in Indonesian textile and garment companies.
Predicting financial distress in the Indian textile sector
Industria Textila, 2021
The purpose of this paper is to predict the financial distress of companies in the Indian textile sector using the Altman Z score. The analysis was conducted on 161 listed textile companies in India for a period of 10 years from 2009 to 2018. All the listed companies are categorized into large, medium, and small using the median split method based on the size of total assets. Kruskal Wallis test is applied to test whether the mean z-score is different for each category of companies. This research study shows that majority of the companies in the Indian textile sector are facing financial distress. Further, it shows that the z score of the small, medium, and large-scale textile companies in India is significantly different.
Jurnal Ilmiah Ilmu Administrasi Publik, 2020
The study aims to find out the influence of profitability variables (Return On Assets), Leverage (Debt To Asset Ratio) and liquidity (Current Ratio) on Financial Distress on retail companies listed on the 2014-2018 period Indonesian Stock Exchange. The population of this study is the entire company contained on the Indonesian Stock Exchange listed retail company of the period 2014-2018. The research sample consists of 21 companies used by purposive sampling methods and taken that meet with criteria from predetermined research samples. The data analysis method used is panel data regression analysis (Random Effect) with a significance level of 5 percent. Based on the results of the research that has been conducted led to that, simultaneously Profitability, Leverage and Liquidity variables have an effect on Financial Distress. Partially variable Profitability has a significant positive effect on Financial Distress, Leverage variables have a significant positive effect on Financial Dist...
Financial Distress and It's Prediction: A Case Study of the Textile and Garment Industry
Asian Journal of Economics, Business and Accounting, 2022
Aims: The objective of this research is to glance at the projections of financial distress in the textile and garment sub-sectors listed on the IDX. Methodology: The case study method is used in this study to employ the descriptive quantitative method approach. While the IDX is the source of the case study data, the purposive sampling method was used on the financial statements of textile and garment sub-sector companies in 2019 and the first quarter of 2020. While the cross-sectional method is used for case study analysis, or by comparing the Z-score (multiple discriminant analysis) that has been performed between one company and the standard zone that has been carried out simultaneously. Results: This study discovered that the case study using multiple discriminant analysis models in the first quarter of 2020 shows a significant impact of Covid-19 on the financial condition of companies listed on the IDX in the textile and garment industry, with 88 percent of companies in a stress zone. This study also shows that both internal and external factors can lead to a company's demise. As a result, corporate financial management decision-making must consider the company's liquidity, debt proportion, and the efficient use of working capital. Implication/Applications: The findings of this study can be useful not only for researchers, but also for practitioners who are interested in financial distress cases.
DRIVERS BEHIND THE FINANCIAL INSOLVENCY: AN EMPIRICAL STUDY ON THE TEXTILE INDUSTRY IN BANGLADESH
The Economics and Finance Letters, 2020
The main purpose of the research study is to assess the financial soundness of the textile industry in Bangladesh. The effects of financial ratios have also been examined. The research has been designed based on published quantitative data in the stock market. 35 listed companies that consist of A-Category, B-Category and Z-category companies were analyzed. In this research study, five financial ratios have been analyzed and tested using the Altman Z-score model. Statistical correlation among the financial ratio was examined to depict the picture of financial distress among the different categories of companies in Textile industries in Bangladesh. Most of the A category companies are in Safe Zone or financially sound, B category companies are into Grey Zone and Z category companies are in distress zone. The outcome of the study can be valuable for the financial managers to take important managerial as well as financial decisions, the shareholders to take appropriate investment decisions and bankers to evaluate the prospective borrowers' credit risk and renew loans of the concerned textile manufacturers of the country. Contribution/Originality: This study is one of the very few studies which have examined the direct relationship of financial ratios with Z-score values regarding different categories of listed textile companies in the stock exchange by using panel data analysis.