Profitability Moderates the Effect of Firm Size, Leverage, and Liquidity on Financial Distress
Journal Title: Oblik i finansi - Year 2023, Vol 1, Issue 3
Abstract
A condition in which a company cannot generate sufficient profits, making it unable to meet or pay its financial obligations, is called financial distress. This is typically due to high fixed costs, a high degree of illiquid assets, or revenues sensitive to economic downturns. Financial distress needs to be studied further as it can provide considerations regarding the company's financial conditions and performance before investing to reduce opportunities for investment losses. The financial distress value can also be a benchmark of whether the company management can manage all company assets, effectively and efficiently control costs, and check opportunities for business development. This research aims to determine the effect of company size, leverage and liquidity on financial distress with profitability as a moderating variable. This research used a purposive sampling technique on food and beverage subsector manufacturing companies with a total population of 41 companies into 17 samples with a research period from 2018-2021. The research results show that leverage has a negative and significant effect on financial distress; instead, company size and liquidity have a positive and significant effect on financial distress. Profitability can moderate the influence of company size and liquidity on financial distress but cannot moderate the influence of leverage on financial distress. So, manufacturing companies in the food and beverage sub-sector need to consider company size, leverage, and liquidity as a reference to avoid financial distress. They need to conduct market analysis to understand growth potential and demand before increasing the company's size. Investors need to choose companies with an appropriate size, stable market share, and reasonable leverage ratio for their investments to be successful.
Authors and Affiliations
Rido Luspratama & Yusuf Ronny Edward & Namira Ufrida Rahmi
Keywords
Related Articles
- EP ID EP724421
- DOI 10.33146/2307-9878-2023-3(101)-53-64
- Views 58
- Downloads 0
Organizational and Methodical Approaches to the Introduction of Mass Damage Assessment
Periodically, the government and experts declare hundreds of billions of US dollars in war losses incurred by Ukraine. However, this is a generalized assessment. Object-by-object expert assessment has an inconsiderable a...
Public Procurement as the Object of Audit and Management of the United Rural Territorial Communities in the Context of Decentralization
United territorial communities in the context of decentralization are authorized to carry out public procurement at their own discretion. However, additional responsibility reinforces the need to involve the institution...
Проблеми та перспективи акцизного оподаткування
Акцизний податок є одним із бюджетоутворюючих та одночасно виконує важливу регулюючу функцію – впливає на обсяги споживання алкогольних та тютюнових виробів, а отже, сприяє зменшенню шкідливого впливу цих виробів на здор...
Організаційні форми аудиту ефективності ділового партнерства
Аудит ефективності ділового партнерства виступає засобом аналізу та контролю ділових партнерських зв’язків у аспекті оптимізації управління фінансовими ресурсами підприємства. Його реалізація можлива як у формі внутрішнь...
Фонд розвитку сільських територій як фінансовий інструмент просторової справедливості в землекористуванні та сталому сільському розвитку*
В межах «завершення» земельної реформи в Україні у складі спеціальних фондів державного і місцевих бюджетів передбачено створення Фонду розвитку сільських територій, кошти якого мають спрямуватись на розвиток місцевої ін...