Leverage Ratio Requirement, Credit Allocation and Bank Stability

Manufacture Sub Sector Garment And Textile have financial distress condition. Increas of sales is one of choice for company can be competitive in free market. But increase of sales will be followed by the many possibilities of uncollected receivable or the low receivable turnover which can effect forced the company to further provide working capital. One way is to get working capital from a third part or what we call debt.This research aims to determine the effect of receivable turnover and the solvency ratio toward the financial distressThe problems of the research were: 1) is the receivable turnover effect toward financial distress condition on Garmen and textile company Listed on IDX on 2011-2015? 2) is the leverage ratio effect toward financial distress condition on Garmen and textile company Listed on IDX on 2011-2015 ? 3) Are the receivable turnover and solvency ratio effect toward financial distress condition on Garmen and textile company Listed on IDX on 2011-2015?The sample of this research is 11 Manufacture company of sub sector Garmen And Textile were taken by using purposive sampling techniques. This research data used secondary data that getting from literature review. Data were tested using multiple linear regression analysis to determine the effect between one variable with another variables, and the data was then processed using SPSS 22.0 for windows.Result of the research showed that partially, receivables turnover hadnâ€™t a significant effect towardÂ the financial distress. Partially, solvency ratio (Debt to Asset) had a significant influence toward financial distress Simultaneously, receivable turnover and solvency ratio had a significant effect toward financial distress.Â Kata kunci:Waste Bank, Waste Bank Management, Waste Bank Basic Concepts, Economic Improvement of the Family

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Role of Credit Rating in determining Capital structure: Evidence from Non-Financial sector of Pakistan

Studies of Applied Economics ◽

10.25115/eea.v38i3.3066 ◽

2020 ◽

Vol 38 (3) ◽

Cited By ~ 1

Author(s):

Shoaib Ali ◽

Imran Yousaf ◽

Muhammad Naveed

Keyword(s):

Capital Structure ◽

Credit Rating ◽

Least Square ◽

Annual Data ◽

Leverage Ratio ◽

Financial Decisions ◽

Financial Firms ◽

High Level ◽

The Impact ◽

The Capital Structure

This paper aims to examine the impact of external credit ratings on the financial decisions of the firms in Pakistan. This study uses the annual data of 70 non-financial firms for the period 2012-2018. It uses ordinary least square (OLS) to estimate the impact of credit rating on capital structure. The results show that rated firm has a high level of leverage. Moreover, Profitability and tanagability are also found to be a significantly negative determinant of the capital structure, whereas, size of the firm has a significant positive relationship with the capital structure of the firm. Besides, there exists a non-linear relationship between the credit rating and the capital structure. The rated firms have higher leverage as compared to the non-rated firms. The high and low rated firms have a low level of leverage, while mid rated firms have a higher leverage ratio. The finding of the study have practical implications for the manager; they can have easier access to the financial market by just having a credit rating no matter high or low. Policymakers must stress upon the rating agencies to keep improving themselves as their rating severs as the measure to judge the creditworthiness of the firm by both the investors and management as well.

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