Abstract
This study aims to examine and analyze how profit and cash flow individually or collectively could influence the prediction of financial distress. This study uses quantitative data methods using the Altman Z-Score analysis method. Data analysis is performed through Eviews8 software application. The population in this study are all manufacturing companies listed on the Indonesia Stock Exchange (IDX) in the period from 2015-2018. The samples used are all manufacturing companies with subsector of plastic and packaging. Data analysis in this study uses econometric model with a simultaneous equation system and data panel estimation method. The results of the study prove that profit does not have a significant effect on financial distress. This is supported by t-test analysis which result in a smaller t-count compared to t-table, with the number -1.76 <2.05, therefore, H1 is rejected. On the other hand, cash flow has a significant effect on financial distress, supported by the result of t-test analysis which shows that the t-count is bigger than t-table, with the number 2.67> 2.05. Therefore, H2 is accepted. Whereas, both profit and cash flow have a significant influence on financial distress, which the results of the analysis of the F test is f-count is higher that f-table, with the number 17.45> 170.77. As a result, H3 is accepted
Highlights
Every company aims to make a profit so that it can survive or develop in the long period and does not experience liquidation
The results of data analysis consist of two variables, namely Profit and Cash Flow
The best model which is free from multicollinearity, heterokedasticity, autocorrelation problems can be produced by using the equation function as follows: Financial Distress =
Summary
Every company aims to make a profit so that it can survive or develop in the long period and does not experience liquidation. One of the uses of profit statement (Harahap, 2011: 57) is to determine the company's ability to distribute dividends to investors. This assumption does not always occur as expected. Often companies that have been operating for a certain period of time are forced to disperse or be liquidated due to financial difficulties that lead to bankruptcy. The way to do this is to analyze the company's financial ratio through certain models such as the Z-Score model and other models
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