Financial Distress Risks in Heavy Construction Firms: A Ratio-Based Analysis

Universitas Pembangunan Nasional Veteran Yogyakarta, Yogyakarta, Indonesia

^* Corresponding author: stharyono@yahoo.co.id

Abstract

This study examines how financial ratios affect heavy construction companies listed on the Indonesia Stock Exchange between 2018 and 2023 in terms of their likelihood of experiencing financial hardship. Utilizing logistic regression. The study analyzed 22 companies selected through purposive sampling using STATA. The findings show that return on equity has a substantial negative impact on the likelihood of financial distress; a higher retun on equity reduces the risk, while a lower retun on equity increases it, as observed in WSKT. Quick ratio significantly positively probability financial distress; lower Quick ratio raises the risk, as seen with MTPS. Debt to assets ratio also significantly increases probability financial distress; a higher Debt to assets ratio is associated with greater risk, exemplified by ASCT. Total assets turnover ratio is positively related to probability financial distress as demonstrated by TAMA. This study emphasizes how crucial it is to keep an eye on these financial measures in order to evaluate the danger of financial trouble and a company's overall stability.