The findings are significant because many companies that appear profitable on paper can still face serious operational disruptions if they fail to maintain healthy cash flows. In manufacturing industries, where substantial capital is required to support production activities, cash shortages can quickly escalate into broader financial problems.
Cash Flow Becomes a Key Indicator of Corporate Health
In today's increasingly competitive business environment, financial sustainability depends not only on profitability but also on a company's ability to generate sufficient cash from its daily operations.
Cash flow statements provide information about how money moves into and out of a business through operating, investing, and financing activities. These reports help managers, investors, creditors, and policymakers evaluate whether a company can meet its financial obligations and maintain stable operations.
According to the researchers from Universitas 17 Agustus 1945 Surabaya, imbalances between cash inflows and outflows can lead to delayed debt payments, production interruptions, and increased dependence on external financing.
The issue is particularly relevant for manufacturing firms such as PT Adhimix PCI Indonesia, whose operations rely heavily on continuous investment in equipment, infrastructure, and working capital.
Examining Five Years of Financial Reports
The research team employed a descriptive quantitative case-study approach using secondary data obtained from PT Adhimix PCI Indonesia's financial reports.
The analysis focused on cash flow statements covering the period from 2020 to 2024. Researchers evaluated the company's financial condition by examining eight cash flow ratios commonly used to assess liquidity and operational performance.
The indicators included:
- Operating Cash Flow Ratio (AKO)
- Cash Flow Coverage Ratio (CAD)
- Cash to Interest Coverage Ratio (CKB)
- Cash Coverage to Current Liabilities Ratio (CKHL)
- Capital Expenditure Ratio (PM)
- Total Debt Ratio (TH)
- Free Cash Flow Ratio (FCF)
- Cash Flow Adequacy Ratio (KAK)
These ratios allowed researchers to determine whether operating cash flow was sufficient to cover current liabilities, debt obligations, investment requirements, and future operational commitments.
Most Cash Flow Indicators Showed Weak Performance
The study found that the majority of PT Adhimix PCI Indonesia's cash flow indicators were below ideal levels during the five-year observation period.
One of the most important measures, the Operating Cash Flow Ratio (AKO), recorded an average value of only 0.71. Financial experts generally consider a ratio above 1 as healthy because it indicates that operating cash flow alone can cover short-term liabilities.
The company's AKO declined significantly over time, falling from 1.31 in 2020 to only 0.18 in 2024.
Researchers concluded that operating cash generated by the company was increasingly insufficient to meet short-term obligations without relying on other funding sources.
Several additional indicators also showed declining trends:
- Cash to Interest Coverage Ratio (CKB) averaged 2.33 times, but dropped sharply to 0.25 times in 2024, suggesting weaker capacity to pay interest expenses.
- Cash Coverage to Current Liabilities Ratio (CKHL) declined from 1.31 in 2020 to 0.18 in 2024, indicating reduced ability to settle short-term debt.
- Total Debt Ratio (TH) consistently decreased, reflecting limited capability to repay total liabilities using operating cash flow.
- Capital Expenditure Ratio (PM) fell from 24.98 times in 2020 to only 0.97 times in 2024, showing increasing difficulty in financing capital expenditures internally.
The researchers noted that much of the company's operating cash flow was being used to meet immediate obligations, leaving limited resources available for future investments.
Positive Signs Remain in Long-Term Cash Capacity
Despite weaknesses in several liquidity indicators, the study identified two encouraging trends.
The Cash Flow Coverage Ratio (CAD) improved consistently throughout the study period. The ratio increased from 7.31 times in 2020 to 27.22 times in 2024, with an average value of 12.72 times.
This trend indicates that earnings before taxes remained adequate to cover financial commitments due within a year.
The Cash Flow Adequacy Ratio (KAK) also improved over time, suggesting that PT Adhimix PCI Indonesia still possesses sufficient long-term cash-generating capacity to finance future obligations, including fixed-asset additions and long-term investments.
As Danang Artdy Santoso, Prof. Dr. Siti Mujanah, and Dr. Achmad Yanu Alif Fianto of Universitas 17 Agustus 1945 Surabaya wrote in their study, increasing cash flow coverage and adequacy ratios indicate that "pre-tax earnings and projected future cash flows remain capable of covering the company's financial commitments."
Liquidity Risks Require Immediate Attention
The researchers warn that continued deterioration in operating cash flow could expose the company to serious liquidity risks.
If not addressed, persistent cash flow imbalances could disrupt production processes, delay supplier payments, and threaten business continuity.
To strengthen financial resilience, the authors recommend that PT Adhimix PCI Indonesia prioritize improvements in operating cash inflows. They also advise management to exercise greater caution when seeking new external financing and to optimize sales performance in order to generate stronger operating cash.
The findings carry broader implications for Indonesian businesses, especially those operating in capital-intensive sectors such as manufacturing, construction, and infrastructure.
For investors and stakeholders, the study reinforces the importance of analyzing cash flow statements alongside profit figures. A company may report accounting profits while simultaneously facing significant cash constraints that jeopardize its operational sustainability.
The research also highlights the need for managers to monitor cash flow indicators regularly as part of strategic financial planning and risk management.
Author Profiles
Danang Artdy Santoso, M.M. is a researcher in the Master of Management Program at Universitas 17 Agustus 1945 Surabaya. His research interests include financial management, corporate performance analysis, and business sustainability.
Prof. Dr. Siti Mujanah, M.M. is a professor at Universitas 17 Agustus 1945 Surabaya specializing in strategic management, human resource management, and organizational development.
Dr. Achmad Yanu Alif Fianto, S.E., M.M. is a lecturer and researcher at Universitas 17 Agustus 1945 Surabaya whose expertise includes marketing, business management, and consumer behavior.
Source
Article Title: Cash Flow Analysis and Its Impact on Company Operations: A Case Study of PT Adhimix PCI Indonesia
Journal: International Journal of Asian Business and Development (Metropolis)
Publication Year: 2026
DOI: https://doi.org/10.55927/metropolis.v2i1.8
URL: https://journalmetropolis.my.id/index.php/metropolis/index
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