Citation:

Ahmad Nur Budi Utama. "Financial Leverage to Predict the Company's Financial Distress" International Research Journal of Economics and Management Studies, Vol. 2, No. 4, pp. 193-197, 2023.

Abstract:

The company's operations and performance have been impacted by the constantly shifting economic landscape. Bankruptcy haunts both big and small businesses, even some that appear to be in good standing. The accounting records of a business can be used to see and quantify its bankruptcy. Financial distress occurs before bankruptcy in a company. In financial distress, the company's condition is experiencing serious financial problems that threaten the continuity of its operations. Financial leverage indicates a company's ability to meet obligations for both the short and long term. The indicator used to measure the level of Financial Leverage of companies in this study is the total debt divided by total capital (Debt to Equity Ratio). The data used in this study is taken from the financial statements of manufacturing companies listed on the Indonesia Stock Exchange for 2020-2022. With quantitative methods, the analysis is carried out by linear regression. The analysis results show that financial leverage does not significantly impact the financial distress condition of manufacturing companies listed on the IDX. The effect of the DER variable on financial distress showed a figure of 72.6%.

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Keywords:

Financial Distress, Financial Leverage, Finance, Financial Condition, Financial Statements.