64 The Effect of Investment, Free Cash Flow, Earnings Management, and Interest Coverage Ratio on Financial Distress Meryana 1 , Erna Setiany 2 Mercu Buana University, Jakarta, Indonesia Email: meryanatimothy@gmail.com, erna.setiany@mercubuana.ac.id ARTICLE INFO ABSTRACT Date Received: 30 November 2020 Revision Date : 20 December 2020 Date Received : 09 January 2021 Keywords: Financial Distress; Investment; Free Cash Flow; Earnings Management; Interest Coverage Ratio; The purpose of this research is to test investments, free cash flow, earnings management, and interest coverage ratio are affecting the risk of financial distress in healthy enterprises.. Healthy companies can be seen from how large the value of working capital, retained earnings, income before tax, market value and sales implemented in the measurement of the financial difficulties model with the Altman Z-score method. Collection of data by purposive sampling and number of samples as many as 33 companies in the category of healthy companies. The results show that free cash flows and interest coverage ratio significant effect on the financial difficulties of healthy companies whereas investment and earnings management had no significant effect on the financial difficulties of healthy companies. Coresponden Author: Email: meryanatimothy@gmail.com Article with open access under license INTRODUCTION Every company generally can face financial distress conditions. Financial distress is a condition in which the agreement or contract between the company and creditors does not function as expected or at a difficult stage (Ghazali et. Al., 2015). Financial difficulties can be characterized by the company's inability to meet its short-term obligations. In Indonesia, financial distress and bankruptcy have again received serious attention, especially when leading companies in Indonesia such as PT. Sariwangi Agricultural Estate Agency and PT. Nyonya Meneer went bankrupt. In addition, there are also large companies experiencing financial difficulties that have had to close their services, such as PT. Citra Maharlika Nusantara Corpora Tbk. (Cipaganti) and PT Internux (a subsidiary of PT. First Media Tbk. BOLT! Service provider). In addition, the collateral manipulation case committed by SNP Finance against 14 banks which resulted in losses of up to IDR 14 trillion also added to the study of the bankruptcy issue. The manufacturing industry is one of the strategic industries in Indonesia. In 2018, the manufacturing industry sector absorbs as much as 14.72% of the workforce or as many as 18.25 million people (Ministry of Industry, 2019). With the high rate of employment, the manufacturing industry has an important role in maintaining the national economy. Performance growth in this industry must be catalyzed in order to generate higher profits and avoid financial distress situations because bankruptcy in companies in these industries can cause unemployment and national economic instability. Analysis of the causes of companies experiencing financial distress will affect the company in determining its financial strategy. A good financial strategy will allow the company to operate sustainably and generate profits in the long term. Therefore, company financial managers must know important indicators that can detect financial distress signals and take innovative steps to prevent bankruptcy. Based on the phenomenon of bankruptcy in Indonesia and other countries, the author proposes research on financial distress, investment, free cash flow, earnings management, interest coverage ratio in manufacturing companies listed on the Indonesia Stock Exchange for the 2016-2017 period. Literature Review In agency theory it is developed with three assumptions. First, agents tend to have limited rationality (bounded rationality), prioritize their own interests (self interest), and avoid risk (risk- aversion). Second, in an organization there is always a conflict of purpose between interested