The Effect of Profit and Cash Flow on Financial Distress (An Empirical Study on Textile and Garment Companies) for the 2021–2024 Period

This study aims to analyze the effect of profit, cash flow, and their interaction on the level of financial distress in textile and garment companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2024 period. A quantitative method using multiple linear regression was employed. The sample consisted of 10 companies with a total of 40 data points, selected through purposive sampling. Classical assumption tests were conducted to ensure data reliability, including tests for normality, autocorrelation, multicollinearity, and heteroscedasticity. The results show that profit, cash flow, and their interaction have a positive and significant effect on the Z-Score, an indicator of financial distress, both simultaneously and partially. The coefficient of determination (R²) of 60.3% indicates a strong model fit in explaining financial distress variations. These findings suggest that companies with strong profitability and liquidity tend to be in a more stable financial condition and are less likely to experience financial distress. This study highlights the importance of managing earnings and cash flow to ensure business sustainability.