RELIANCE ON FINANCIAL RATIOS DERIVATIVE BY OPERATING CASH FLOW LIST IN PREDICTING FINANCIAL FAILURE DURING THE CORONAVIRUS (COVID-19) PANDEMIC

Abstract

Financial distress is a circumstance in which a company has financial distress; if these conditions are not remedied, the company may declare bankruptcy. This study examines the impact of liquidity ratios, profitability, financial leverage, and operating cash flows on Jordanian Stock Exchange businesses' financial distress during COVID-19. This study was conducted on companies listed on the Jordanian Stock Exchange that give annual financial report data for download on the Jordanian Stock Exchange's official website. This study used quantitative data from the Jordanian Stock Exchange, such as the financial accounts for 2019–2021. Secondary data sources are used in this investigation. As independent variables, liquidity ratios, profitability, financial leverage, and operating cash flows were used in this study, whereas financial distress was used as a dependent variable. A logistic regression analysis was performed in this investigation. The results of this study revealed that the liquidity ratio has a negative effect on the condition of corporate financial distress listed on the Jordanian Stock Exchange, based on the results of logistic regression analysis with a significance level of 1%. Furthermore, the findings demonstrated that profitability ratios had a detrimental impact on the situations of financially distressed companies listed on the Jordanian Stock Exchange. Furthermore, the financial leverage ratio positively affects the condition of Jordanian Stock Exchange-listed businesses in financial distress. Also, the operating cash flow ratio helps a company's financial situation on the Jordanian Stock Exchange. Therefore, this study recommended that the companies study the financial distress in light of the circumstances that Jordan went through before and after the Coronavirus (COVID-19) pandemic, which proved that Jordan came out of these crises stronger by avoiding financial distress or crisis.