THE EFFECT OF OPERATIONAL EFFICIENCY ON FINANCIAL DISTRESS : A SYSTEMATIC LITERATURE REVIEW

Abstract

This study investigates the effect of operational efficiency on financial distress among manufacturing firms listed on the Indonesia Stock Exchange (IDX). Operational efficiency reflects a company’s ability to utilize its assets effectively to generate sales and profits, measured using the Total Asset Turnover (TATO) ratio. The research adopts a quantitative design with secondary data collected from audited financial statements. Logistic regression analysis was employed to test the relationship between operational efficiency and financial distress, with control variables such as liquidity, profitability, and firm size. The findings reveal that higher operational efficiency significantly reduces the likelihood of financial distress, indicating that efficient asset utilization strengthens financial sustainability. This study contributes to the understanding of how operational capacity influences firms’ resilience against financial decline, offering insights for managers and investors in anticipating early signs of distress