Prediction of Potential Bankruptcy of Mining and Petroleum Companies in Indonesia

Abstract

This research was conducted to provide information to stakeholders about the sustainability of mining and oil companies in Indonesia. Thus, the financial distress model (Altman Z-score) was adopted in this study to predict bankruptcy potential in mining and oil companies in Indonesia. This research uses descriptive method with a quantitative approach. The population in this study consists of mining and oil companies listed on the Indonesia Stock Exchange (IDX) in the 2010-2018 period. The sampling technique used purposive sampling technique. The results of the data calculation show that working capital to total assets (X1), retained earnings to total assets (X2), earnings before interest and taxes to total assets (X3), market value of equity to book value of debt (X4), and sales to total assets (X5) has a positive value. This means that all mining and petroleum companies in the sample have a very healthy financial condition and indicate that the company is in the non- bankrupt company category. This study only analyses financial statements (fundamental analysis), thus ignoring the cost of capital. This will make it difficult to know whether a company has succeeded in creating value or not.