PREDICTION FINANCIAL DISTRESS USING FINANCIAL RATIOS WITH DISCRIMINANT ANALYSIS AND REGRESSION LOGISTIC METHOD

Abstract

The purpose of this study was to identify predictors of company's financial distress using financial ratios with analysis discriminant method and logistic regression analysis to reveal comparison predictions and accuracy. Financial ratios were used in this study are liquidity ratios, activity, leverage and profitability.
This study relies on 15 samples financial distress and 15 non financial distress of manufacturing companies listed on the Indonesia stock exchange during period 2007 - 2015. This ratios were analyzed using a statistical method known as discriminant analysis and regression logistics analysis to achieve the best of financial ratios that can distinguish between financial distress company and non financial distress company in one year, two years and three years before distress.
The result is logistic regression analysis was found have level’s prediction accuracy more higher than discriminant analysis. Discriminant analysis and logistic regression analysis identified that current ratio, working capital to total assets ratio total asset turnover ratio and return on asset ratio are the most important as predictors.