Question

Explain five determinant of possible bank financial distress that could cause bank failure.

Answer 1

In general, caused by external factors and internal factors, but in this study to be discussed are internal factors only, namely factors that are within the company itself. Sharpe, Alexander, and Bailey (2003) states that internal factors include financial and non-financial factors. Financial factors include the existence of debt that is too large so that it becomes a heavy fixed burden for the company, the existence of short-term liabilities greater than current assets, the slow collection of receivables or the amount of
bad debt, errors in dividend policy, and insufficient depreciation funds. While non-financial factors are the existence of errors in site selection, product determination and determination of business scale, poor organizational structure, errors in the selection of company leaders, managerial incompetence (purchasing, sales, marketing policies)