Altman Z-Score Method Application in Predicting Financial Distress in Manufacturing Companies Listed in Indonesia Stock Exchange In 2016 - 2018
Abstract
Financial distress is an important indicator of a company's financial condition and requires early identification to support managerial and investment decisions. This study aims to assess the financial distress condition of manufacturing companies listed on the Indonesia Stock Exchange during 2016–2018 using the Altman Z-Score model. The analysis incorporates five financial ratios: Working Capital to Total Assets, Retained Earnings to Total Assets, Earnings Before Interest and Tax to Total Assets, Market Value of Equity to Book Value of Debt, and Sales to Total Assets. The study uses financial statement data from 30 manufacturing companies and applies descriptive analysis to calculate the Z-Score and classify each company into the Safe, Warning, or Distress Zone. The results show differences in financial conditions across the sampled companies. Based on the average Z-Score, several companies were classified in the Safe Zone, while others fell into the Warning Zone or Distress Zone. These differences indicate varying levels of financial vulnerability within the manufacturing sector during the observation period. The findings demonstrate that the Altman Z-Score can be used as an early-warning screening tool to identify differences in corporate financial conditions. The study provides a historical reference for assessing financial distress among Indonesian manufacturing companies and supports further monitoring of firms exhibiting relatively weaker financial indicators.
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