ANALYSIS THE EFFECT OF LIQUIDITY RATIO, SOLVABILITY RATIO, AND BANKRUPTCY PREDICTION MODEL TOWARD THE ABILITY OF COMPANY TO CONTINUE AS GOING CONCERN

Abstract

Going concern is a condition where a company can continue to operate in the subsequent period and assumes that company is not expected to be liquidated in the subsequent period that is able to known from now on.The auditor has a responsibility to evaluate whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited (hereinafter referred to as a reasonable period of time). The opinion is expressed in Independent Auditor Report and this opinion about going concern is used by the users in making decisions. This research is aiming to analyze the effect of liquidity ratio, solvability ratio, and bankruptcy prediction model toward the ability of company to continue as going concern. The research uses manufacturing companies that is listed in Indonesia Stock Exchange. Based on purposive sampling, researcher takes 40 samples for year 2011 in analyzing and testing the hypothesis raised by researcher. The research method in testing hypothesis that is used by researcher is logistic regression. The result of this research indicates that solvability ratio that is represented with debt ratio has significant effect toward the ability of company to continue as going concern. Whereas liquidity ratio that is represented with current ratio and bankruptcy prediction model that is represented with Altman Z score has no significant effect toward the ability of company to continue as going concern.