1.1 Research Background and Purpose
Nowadays the banking industry experienced rapid development. And its proof by the new banks were established in the lasts 15 years, and it will be created a competitive in banking industry. Industry Indonesian banks are faced with various challenges due to the slowdown economy and tightening liquidity limiting capacity growth credit and led to increased NPI banking sector. Bank is an intermediary that can encourage progress development through credit facilities and the easiness of payment and withdrawal in the transaction process performed by Indonesia actors economy (Judisseno, 2002: 95). This is explained in the article 4 of Law no. 10 of 1998, which aims at supporting the Indonesia banking…show more content… The Bank was a driving wheel of economy. functions bank as financial institutions is vital, for example, a place to store money, equitable circulation of money in order to support business activities, do payment or billing, and many other financial services.
Expertise in predicting the risk of bankruptcy of the company will very beneficial to many parties, especially for investors and for owners company. For investors, the bankruptcy will reduce the investment or even loss of the entire investment. As for the owner of the company, bankruptcy may result in the closure of companies because too many obligations to be borne by the company without any income. Therefore, by predicting the risk of bankruptcy, will there are many people who could be saved.
The purpose of this paper is to attempt an assessment of this issue the quality of ratio analysis as an analytical technique. The prediction of corporate bankruptcy is used as an illustrative case. Specifically, a set of financial and economic ratios will be investigated in a bankruptcy prediction context wherein a multiple discriminant statistical methodology is employed. The data used in the study are limited to manufacturing…show more content… The aim of this phase to identify all risks, which could interrupt or damage the business development (Hermann, 1996, p.41; Stroeder, 2008, p.212). The risks that should be identified can either have a negative impact on the balance sheet, the financial statement or the cash flow situation of the company and therefore also on its’ development (Wesel, 2010, p.282). The uncertainties of the company and critical factors of the business can be identified by checking the business processes with regard to their risk potential (Form, 2005, p.122; Liekweg & Weber, 2000, p.284). there are two different approaches are possible, referred to as the progressive and the regressive approach. The progressive approach aims to identify possible plan deviations and losses based on typical risk factors (Hermann, 1996, p.41). Those risk factors can be of different origin; as for example they can result from changes in the markets, legal aspects, company intern aspects or financial factors (Liekweg & Weber, 2000, p.284). The second approach is regressive, starting the other way around with the main goals of the company and trying to find possible reasons among the risk factors that could lead to a deviation from the goals (Hermann, 1996, p.41. Also with regard to saving resources, based on experience the management can eliminate irrelevant risk factors already in the beginning (Scheve, 2005, p.46). In order to identify all risks and