This research is useful to test the ability of Liquidity ratio (CR, WCTA, SA),
Profitability (ROI, ROE, NPM) and Financial Leverage (DR) in predicting
the probability of financial distress at the condition of manufacturing firms in
Indonesia Stock Exchange. This sample amounted to 49 companies
consisting of the observation period 2007-2008 in which 44 companies that
have non-financial conditions of distress and 5 companies that experience
financial distress. Period estimates in this study is the year 2005 until 2007.
This research is based on a quantitative approach using group membership
prediction techniques, which are statistically test the research hypothesis is
done by using logistic regression Backward Stepwise method with the help
of SPSS. The results of this study indicate that financial ratios can be used
to predict the financial distress condition at the manufacturing companies in
Indonesia Stock Exchange. This is based on the level of accuracy shown in
Clasification overall rate of 98.0%. However, the results of this study also
shows that not all financial ratios that can be used to predict the financial
distress condition of corporate. The ratio of the dominant in explaining the
financial distress condition of corporate is profitability ratios that are proxies
by the ROI.
Keywords: financial distress, financial ratios, logistic regression