The Impact of Liquidity and Leverage on Financial Distress: Profitability as an Intervening
1Inge Andhitya Rahmawati,2Nur Khusniyah Indrawati,3Andarwati
1,2,3Faculty of Economics and Business, Brawijaya University
https://doi.org/10.47191/jefms/v6-i7-51ABSTRACT:
Financial distress is a condition where a company experiences financial difficulties that can go bankruptcy. Financial distress is an early warning system used to identify and improve the condition of a company before it reaches a crisis or bankruptcy. By predicting and understanding financial distress conditions from the beginning, it is expected to help management take preventive actions that can keep the company away from bankruptcy. This study aims to examine how liquidity and leverage affect financial distress mediated by profitability. This research specifically focuses on property and real estate companies listed on the Indonesia Stock Exchange for the period 2019 to 2021. This research applies a quantitative approach with a total population of 47 companies. The sampling technique used is saturated sampling. The data is analyzed using path analysis. The result shows that liquidity has an influence on profitability, but leverage does not affect profitability. Leverage and profitability influence on financial distress, but liquidity has no effect on financial distress. Furthermore, profitability is able to mediate the relationship of liquidity to financial distress, but profitability is unable to mediate the relationship of leverage to financial distress.
KEYWORDS:
Liquidity, leverage, profitability, financial distress
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