Can Liquidity, Profitability, and Leverage Predict Financial Distress?

Amelia Oktrivina; Kurnia Heriansyah; Fiona Almyra Fryenddisca

doi:10.58777/rfb.v3i2.537

Authors

Amelia Oktrivina Faculty of Economics and Business, University of Pancasila, Jakarta
Kurnia Heriansyah Faculty of Economics and Business, University of Pancasila, Jakarta
Fiona Almyra Fryenddisca Faculty of Economics and Business, University of Pancasila, Jakarta

DOI:

https://doi.org/10.58777/rfb.v3i2.537

Keywords:

Liquidity, Profitability, Leverage, Financial Distress

Abstract

This study analyzes the influence of liquidity, profitability, and leverage on financial distress among manufacturing firms in the basic and chemical industry sectors listed on the Indonesia Stock Exchange (IDX) during 2019–2022. Using purposive sampling, 48 firms were selected, producing 192 observations. The results show that liquidity and leverage do not significantly affect financial distress, while profitability has a significant impact. These findings underscore the crucial role of profitability in maintaining financial stability. Managerially, firms should prioritize profitability improvement through operational efficiency, cost control, and revenue diversification to avoid financial distress, especially during economic downturns. Although liquidity and leverage were not significant, maintaining prudent management of both remains essential for long-term resilience. This study’s originality lies in examining the combined effects of liquidity, profitability, and leverage in Indonesia’s post-pandemic basic and chemical manufacturing sectors, using logistic regression as a predictive tool. In contrast to prior research conducted before crises or using single-variable approaches, this study provides new empirical evidence that profitability serves as the key determinant of financial distress under unstable macroeconomic conditions, offering valuable insights for both researchers and industry practitioners.

References

Abbas, D. S. (2019). Pengaruh likuiditas, komisaris independen, kepemilikan institusional dan ukuran perusahaan terhadap financial distress (pada perusahaan sektor aneka industri yang terdaftar di Bursa Efek Indonesia periode 2013–2016). Jurnal Ilmiah Akuntansi Universitas Pamulang, 7(2), 119–127. https://doi.org/10.32493/JIAUP.V7I2.2513

Agustini, N. W., & Wirawati, N. G. P. (2019). Pengaruh rasio keuangan pada financial distress perusahaan ritel yang terdaftar di Bursa Efek Indonesia (BEI). E-Jurnal Akuntansi, 26(1), 251–263. https://doi.org/10.24843/EJA.2019.V26.I01.P10

Atina, N., & Rahmi, R. (2019). Pengaruh likuiditas, profitabilitas, leverage, dan arus kas terhadap financial distress pada perusahaan manufaktur di BEI. Jurnal Ilmu dan Riset Akuntansi, 8(2).

Ayuningtiyas, I. S., & Suryono, B. (2019). Pengaruh likuiditas, profitabilitas, leverage dan arus kas terhadap kondisi financial distress. Jurnal Ilmu dan Riset Akuntansi (JIRA), 8(1).*

Azalia, V., & Rahayu, Y. (2019). Pengaruh leverage, likuiditas, profitabilitas, dan ukuran perusahaan terhadap financial distress. Jurnal Ilmu dan Riset Akuntansi (JIRA), 8(6). Retrieved from https://jurnalmahasiswa.stiesia.ac.id/index.php/jira/article/view/2094

Hanifah, A., & Lastiati, A. (2025). Emergency fund management. AKURASI: Jurnal Riset Akuntansi dan Keuangan, 7(1), 45–58. https://doi.org/10.36407/akurasi.v7i1.1511

Hosmer, D. W., Lemeshow, S., & Sturdivant, R. X. (2019). Applied logistic regression (4th ed.). Hoboken, NJ: Wiley.

Kalimah, S. (2017). Pengaruh profitabilitas, likuiditas dan leverage dalam memprediksi financial distress (studi empiris pada perusahaan manufaktur yang terdaftar di BEI periode 2009–2013). Jurnal Akuntansi dan Ekonomi (JAE), 2(1), 43–66. https://doi.org/10.29407/JAE.V2I1.605

Kartika, A., Nuryanto, & Wibowo, R. A. (2020). The effect of leverage, liquidity, and profitability on financial distress. Jurnal Akuntansi Multiparadigma, 11(3), 528–541. https://doi.org/10.21776/ub.jamal.2020.11.3.32

Kasmir. (2019). Analisis laporan keuangan (Revisi). Jakarta: PT RajaGrafindo Persada.

Kliestik, T., Misankova, M., Valaskova, K., & Svabova, L. (2020). Bankruptcy prediction in Visegrad group countries using logistic regression and machine learning techniques. Journal of Business Economics and Management, 21(2), 1–20. https://doi.org/10.3846/jbem.2020.11416

Kumar, V., & Gaikwad, R. (2023). Profitability and financial distress: Evidence from Asian manufacturing sectors. Journal of Risk and Financial Management, 16(2), 78–90. https://doi.org/10.3390/jrfm16020078

Li, J., & Wang, X. (2020). The effect of capital structure and profitability on financial distress: Evidence from Asia-Pacific markets. Asian Economic and Financial Review, 10(8), 834–848.

Lin, Y., Chen, M., & Tsai, C. (2022). Financial distress prediction under COVID-19: The role of liquidity and leverage. Finance Research Letters, 47, 102–122. https://doi.org/10.1016/j.frl.2022.102901

Mahaningrum, S., & Merkusiwati, N. K. L. A. (2020). The effect of financial ratios on financial distress in manufacturing firms listed on IDX. E-Jurnal Akuntansi, 30(5), 1305–1320.

Modigliani, F., & Miller, M. H. (1963). Corporate income taxes and the cost of capital: A correction. The American Economic Review, 53(3), 433–443.

Mufidah, E. (2017). Analisis laba, arus kas operasi dan nilai buku ekuitas terhadap harga saham. Eksis: Jurnal Riset Ekonomi dan Bisnis, 12(1), 79–90. https://doi.org/10.26533/EKSIS.V12I1.79

Nguyen, H. T., Tran, M. D., & Hoang, N. P. (2022). Capital structure, profitability, and financial distress in emerging markets. Cogent Economics & Finance, 10(1), 211–225. https://doi.org/10.1080/23322039.2022.2118225

Nisa, K. (2020). Pengaruh likuiditas dan profitabilitas terhadap financial distress pada perusahaan sektor manufaktur. Jurnal Ilmiah Akuntansi Fakultas Ekonomi, 6(1), 33–42.

Oktrivina, A., Heriansyah, K., & Fryenddisca, F. A. (2025). The influence of liquidity, profitability, and leverage on financial distress conditions. AKURASI: Jurnal Riset Akuntansi dan Keuangan, 7(1), 45–58. https://doi.org/10.36407/akurasi.v7i1.1511

Panjaitan, I. V., & Supriyati, D. (2023). The Effect of Profitability and Leverage on Firm Value with Firm Size as a Moderating Variable. Research of Finance and Banking, 1(1), 34–46. https://doi.org/10.58777/rfb.v1i1.34

Platt, H. D., & Platt, M. B. (2008). Financial distress comparison across three global regions. Journal of Risk and Financial Management, 1(1), 129–162. https://doi.org/10.3390/jrfm1010129

Pranata, V., & Murni, S. A. (2022). Dampak tata kelola perusahaan terhadap pelaporan keuangan internet pada perusahaan manufaktur di Indonesia. Jurnal Ilmiah Akuntansi Fakultas Ekonomi (JIAFE), 8(2), 237–252. https://journal.unpak.ac.id/index.php/jiafe/index

Santosa, P. W., Budiantoro, H., & Zuzryn, A. S. (2022). The Moderating Role of Firm Size on Relationship between Majority Ownership and Debt Policy of Property Sector. Jurnal Manajemen, 26(2), 315–330. https://doi.org/10.24912/jm.v26i2.932

Santosa, P. W., Rahayu, S. I., Simon, Z. Z., & Tambunan, M. E. (2022). Related Party Transactions and Corporate Governance in Business Group: Evidence from Indonesia. Journal of Economics, Business, & Accountancy Ventura, 25(1), 10. https://doi.org/10.14414/jebav.v25i1.2719

Santosa, P. W., Tambunan, M. E., & Kumullah, E. R. (2020). The role of moderating audit quality relationship between corporate characteristics and financial distress in the Indonesian mining sector. Investment Management and Financial Innovations, 17(2), 88–100. https://doi.org/10.21511/imfi.17(2).2020.08

Sihombing, P., Pranata, N., & Kwee, Y. (2024). Effect of Dividend, Profitability, and Interest Rates on Firm Value with Leverage as Moderating. Research of Finance and Banking, 2(1), 14–24. https://doi.org/10.58777/rfb.v2i1.218

Sudaryanti, D., & Dinar, A. (2019). Analisis prediksi kondisi financial distress menggunakan rasio likuiditas, profitabilitas, financial leverage dan arus kas. Jurnal Ilmiah Bisnis dan Ekonomi Asia, 13(2), 101–110. https://doi.org/10.32812/jibeka.v13i2.120

Suryani, G. W., & Aminah, W. (2019). Faktor-faktor yang memitigasi financial distress pada perusahaan pertambangan. Jurnal Riset Akuntansi Kontemporer, 11(1), 1–8.

Tahir, M., Khalid, S., & Ali, W. (2023). Financial leverage and corporate default risk: Evidence from post-pandemic emerging markets. Emerging Markets Finance and Trade, 59(3), 365–382. https://doi.org/10.1080/1540496X.2023.2170467

Tascón, M. T., Castaño, F. J., & Castro, P. (2019). Financial distress and bankruptcy prediction using financial ratios: A European perspective. Sustainability, 11(3), 701–715. https://doi.org/10.3390/su11030701

Tian, Y., & Yu, M. (2021). Profitability and financial stability in emerging markets: Evidence from China and ASEAN. International Review of Financial Analysis, 73, 101651. https://doi.org/10.1016/j.irfa.2020.101651

Utami, Y. P. (2021). Pengaruh rasio keuangan, arus kas operasi, dan struktur kepemilikan terhadap kondisi financial distress. Sintaksis: Jurnal Ekonomi dan Bisnis, 1(2), 24–34.

Wiratna, S. (2017). Analisis laporan keuangan. Yogyakarta: Pustaka Baru Press.

Yusnita, E. (2022). The effect of profitability, leverage, and liquidity on financial distress in manufacturing firms listed on the Indonesia Stock Exchange. Jurnal Akuntansi dan Keuangan, 9(4), 112–124.

Zulfahmi, I., & Subing, H. J. T. (2025). Fundamental Factors and Stock Returns: Market Capitalization’s Role in Forming Investment Outcomes. Research of Finance and Banking, 3(1), 47–58. https://doi.org/10.58777/rfb.v3i1.410