The Influence of Funding Cash Flow and Leverage on Financial Distress with Liquidity as a Moderating Variable (Analisa: Jurnal Manajemen dan Akuntansi)

Summary

• The study covers textile and garment manufacturers listed on the Indonesia Stock Exchange from 2020 to 2024.p.1
• Of 29 companies in the population, 20 were selected, giving 100 panel-data observations.p.1
• Financing cash flow was found to significantly reduce the level of financial distress.p.1
• The adjusted R square of the regression model is 0.173.p.6
• Liquidity moderates the effect of leverage on financial distress (significance 0.039) but not the effect of financing cash flow (significance 0.529).p.7

Key insights

1. Sampled textile and garment companies showed recurring losses during the observation period.p.2
2. Financial distress is a weakening of financial health before bankruptcy or liquidation, indicated by recurring losses, weak cash generation and rising debt burden.p.2
3. Liquidity is measured with the Current Ratio and positioned as a moderating variable.p.3
4. The analysis draws on Resource Based View, Pecking Order, Agency and Signaling theories.p.4
5. Financial distress is measured using the Interest Coverage Ratio and leverage using the Debt to Equity Ratio.p.5
6. Better financing cash flow is associated with lower risk of financial distress.p.7
7. A capital structure dominated by debt makes firms more vulnerable to financial pressure, especially in sectors with high working capital needs.p.8
8. Low liquidity can amplify financial pressure when debt is high, so cash flow, debt structure and liquidity should be managed together.p.9