Analysis of Financial Distress in Construction Companies with the Altman Method

Abstract

The Construction sector is one of the most affected by Covid-19, many companies are found to be bankrupt. This study used regression panel data with more than 30 observations. The variables analyzed are current ratio, DAR, ROA and sales growth. The results of the current ratio research have a positive effect with a significant coefficient of 1.292 on financial distrees proxied with the Z-Score, meaning that the higher the liquidity value will be followed by the Z-score value so that financial difficulties are lower (negative). DAR has a positive effect on the value of the coefficient of 1.142 greater than 0.05 so that it is not significant or influential on financial difficulties proxied through the Z-Score, meaning that the size of leverage cannot be used as a reference to assess the financial difficulties experienced by the company. ROA has a positive effect with a coefficient of 5.377 and affects financial difficulties proxied through the Z-Score, meaning that the high profitability value will be followed by a high Z-score value so that financial difficulties will be lower (negative effect). Sales growth has a negative effect with a coefficient of -0.834 has no effect on financial difficulties proxied through the Z-Score, meaning that the size of sales growth cannot be used as a reference to assess the financial difficulties experienced by the company.