ANALYSIS OF CORPORATE BANKRUPTCY USING THE ALTMAN Z SCORE METHOD AND FINANCIAL RATIO

Abstract

This study examines the prediction of corporate bankruptcy using the Altman Z- score method in manufacturing companies listed on the Indonesia Stock Exchange

(IDX) from 2013 to 2022. Altman Z-score uses key financial ratios suchas Working Capital to Total Assets, Retained Earnings to Total Assets, EBIT to Total Assets, and Equity to Total Liabilities to evaluate financial health and bankruptcy risk. The results showed that while some companies showed resilience, others faced significant financial difficulties, indicating a higher risk of bankruptcy. This study highlights the Altman Z-score as an effective tool for early warning in financial decision-making for investors and managers. Its limitations include incomplete financial data and not incorporating external factors such as market fluctuations and regulatory changes, which may affect the accuracy of predictions. Despite these challenges, this study offers valuable insights into bankruptcy risk in the Indonesian manufacturing sector.