The Effect of Liquidity, Operating Capacity, Firm Size, and Sales Growth on Financial Distress

Abstract

Financial distress is a phase of declining financial condition that occurs before the onset of bankruptcy. This study aims to examine the effect of liquidity, leverage, operating capacity, sales growth, and firm size on financial distress. This research was conducted on companies listed on the Indonesia Stock Exchange during the 2016–2017 period. The samples used consisted of 108 company observations selected using a purposive sampling method. Data collection was carried out using documentation obtained from the IDX website. The analysis technique used in this study is logistic regression, assisted by the E-Views 9 program. The results of the analysis indicate that liquidity, operating capacity, sales growth, and firm size are able to affect financial distress in manufacturing companies with a negative direction.