Original Article ISSN (Online): 2350-0530 ISSN (Print): 2394-3629 International Journal of Research - GRANTHAALAYAH September 2021 9(9), 306-315 How to cite this article (APA): Sudaryo, Y., Sofiati, N. A., Kumaratih, I., Limakrisna, N., Haat, M. H. C., Muhammad, Z., Kusumawardani, A., Saputra, J. (2021). Factors That Affect Financial Distress in Indonesia. International Journal of Research - GRANTHAALAYAH, 9(9), 306-315. doi: 10.29121/granthaalayah.v9.i9.2021.4269 306 FACTORS THAT AFFECT FINANCIAL DISTRESS IN INDONESIA Yoyo Sudaryo 1 , Nunung Ayu, Sofiati (Efi) 2 , Ita Kumaratih 3 , Nandan Limakrisna 4 , Mohd Hassan Che Haat 5 , Zikri Muhammad 6 , Astrin Kusumawardani 7 , Jumadil Saputra 8 1, 2, 3, 7 Indonesia Membangun University, Bandung, Indonesia. 4 Persada Indonesia University Y.A.I, Jakarta, Indonesia. 5, 6, 8 Faculty of Business, Economics and Social Development Universiti Malaysia Terengganu. Received 1 September 2021 Accepted 15 September2021 Published 30 September2021 Corresponding Author Yoyo Susdaryo, y.sudaryo2@gmail.com DOI 10.29121/granthaalayah.v9.i9.2021. 4269 Funding: This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors. Copyright: © 2021 The Author(s). This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. ABSTRACT The results show that, it is proven that the variable liquidity and interest rates have a negative effect on financial distress. Meanwhile, the variables of Profitability, Leverage and Company Size have a positive effect on financial distress. While the Economic Stimulus variable is known to be the relationship between all variables of Liquidity, Profitability, Leverage, Company Size and Interest Rate on variables to Financial Distress. This means that company leaders must take into account liquidity, profitability, leverage, company size and interest rates to avoid financial distress. Keywords: Liquidity, Profitability, Leverage, Company Size, Interest Rates, Financial Distress 1. INTRODUCTION A company can be categorized as experiencing financial distress if the company has a performance that shows negative net income. When firm experiences corporate financial distress, the operating conditions of the firm deteriorate thus leading to heavy financial burden on the firm resulting to inability of the firm in paying both secured, preferential and unsecured creditors (Garlappi and Yan, 2011; Benmelech et al., 2012) in Fredrick (2019). Liquidity ratios show the entity’s ability to meet its short-term liabilities, as the weakness of the value of these ratios indicates that the organization may face difficulties in meeting short-term financial liabilities (Amengor, 2010) in Durrah (2016). Type of Financial Ratios Profitability Ratios Brigham and Houston (2010: 149) in Dai (2016) argues that the ratio of profitability is a group that shows the ratio of the combination of the effects of liquidity, asset management, and debt on operating results, From the above definition it is known that a ratio that provides information on a company's ability to benefit by utilizing the resources available within the company. Leverage ratio is a ratio that measures the ratio of funds provided by the owner of funds borrowed from creditor companies. This ratio shows the company's ability to meet its financial obligations, both short and long term (Abdul:2013) in Makiwan (2018). In this study, leverage is measured by a debt asset ratio (DAR). Debt asset ratio (DAR) is the ratio of debt to total assets which can be called a debt ratio, which measures the percentage of funds originating from debt. What is meant by debt is all debts owned by the company, both short-