42 Chapter IV Findings: Business Solution IV.1 Financial Scoring Analysis IV.1.1 Altman Z-Score Altman Z-Score is a statistical indicator used to assess the financial health of a company and predict the likelihood of bankruptcy, and the score calculates ratios between key financial elements such as profitability, liquidity, and debt structure to evaluate the level of financial risk a company faces, Its main purpose is to provide early warning signals of potential bankruptcy, allowing companies to take preventive measures before their financial condition worsens, Altman Z-Score criteria typically classify companies as follows which scores above 3 indicate a very low bankruptcy risk, scores between 1.8 and 3 are in a grey zone with low risk, while scores below 1.8 suggest a higher likelihood of bankruptcy. Table IV.1 The Altman Z-Score of Unilever for period 2020-2024 UNVR (Q3) 1.2(X1) 1.4(X2) 3.3(X3) 0.6(X4) 1.0(X5) Altman Z-Score 2020 -0.1769 0.4193 1.0864 10.6788 1.5397 14 2021 -0.2333 0.3571 0.9248 5.2587 1.4861 8 2022 -0.1896 0.3844 0.9729 6.8046 1.5581 10 2023 -0.2092 0.3853 0.9401 5.9231 1.6120 9 2024 -0.4137 0.2762 0.7708 3.7765 1.6573 6 The financial condition of Unilever, based on the Altman Z-Score from 2020 to 2024, demonstrates a consistent decline, In 2020, the Altman Z-Score stood at 14, indicating a very low bankruptcy risk, a significant decrease occurred in the following year, with the Altman Z-Score dropping to 8, reflecting an increase in potential risk, though still within a safe zone, and the decline suggests a weakening overall financial performance. A slight improvement in the Altman Z-Score is observed in 2022, rising to 10, indicating some recovery compared to the previous year, However, this improvement remained insufficient to reach the higher Altman Z-Score of 2020, which is considerably stronger, the Altman Z-Score decreased again in 2023, 43 reaching 9, signaling continued financial pressure, and the situation reflects ongoing financial challenges that require serious attention. The year 2024 marked the lowest Altman Z-Score in this period, at 6, approaching the threshold of a high-risk zone, and the value indicates a significant increase in bankruptcy risk compared to previous years, the trend suggests mounting pressure on the company’s financial stability, improved financial management is crucial to mitigate further risks. The overall Altman Z-Score trend illustrates a steady decline in Unilever’s financial stability from 2020 to 2024, an increasing bankruptcy risk, particularly after 2021, is evident, rhe decreasing Altman Z-Score emphasizes the need for more effective mitigation strategies to sustain financial performance, a thorough evaluation of key factors such as profitability, liquidity, and debt structure is essential to improve the company’s financial condition. Table IV.2 The Altman Z-Score of Mayora for period 2020-2024 MYOR (Q3) 1.2(X1) 1.4(X2) 3.3(X3) 0.6(X4) 1.0(X5) Altman Z-Score 2020 0.6163 0.7453 0.3535 3.6327 0.9252 6 2021 0.5185 0.7223 0.2135 3.3325 0.9879 6 2022 0.4849 0.7031 0.2057 2.2421 0.9881 5 2023 0.5148 0.8029 0.3627 3.5833 0.9775 6 2024 0.4858 0.7105 0.2822 2.6748 0.8454 5 The financial condition of Mayora, based on the Altman Z-Score from 2020 to 2024, demonstrates a generally stable performance with minimal fluctuations, in 2020, the Altman Z-Score stood at 6, reflecting a low bankruptcy risk, and the same value is maintained in 2021, indicating consistent financial stability, all of these results reflect effective financial management in keeping risks under control. Slight decrease occurred in 2022, with the Altman Z-Score dropping to 5, signaling an increase in financial risk, though still within a safe range, this decline may indicate emerging pressures on profitability or liquidity, in 2023 the Altman Z- 44 Score rose again to 6, showing improvements in certain financial elements, and this stability reflects the company’s ability to effectively respond to financial challenges. The Altman Z-Score decreased again in 2024, returning to 5, suggesting a slight increase in bankruptcy risk compared to the previous year, this decline highlights the potential for a decrease in financial performance, requiring proactive measures, and the financial ratios contributing to the Altman Z-Score point to a trend that calls for further evaluation, a more adaptive financial strategy could help restore stability in the future. Overall, Mayora’s Altman Z-Score during this period indicates relatively stable financial conditions, despite minor fluctuations, bankruptcy risk remains low, though the declines observed in certain years emphasize the need for tighter monitoring of key financial elements, and this trend underscores the importance of strategic planning to maintain consistent financial performance, more focused efforts in managing profitability, liquidity, and debt structure are necessary to enhance financial resilience. Table IV.3 The Altman Z-Score of Indofood for period 2020-2024 INDF (Q3) 1.2(X1) 1.4(X2) 3.3(X3) 0.6(X4) 1.0(X5) Altman Z-Score 2020 0.0682 0.2433 0.1379 0.3706 0.3639 1 2021 0.0145 0.2775 0.2023 0.3327 0.4230 1 2022 0.1467 0.2979 0.1628 0.3160 0.4399 1 2023 0.1901 0.3420 0.2241 0.3735 0.4443 2 2024 0.2369 0.3837 0.2675 0.4242 0.4448 2 The financial condition of Indofood, based on the Altman Z-Score from 2020 to 2024, reflects a high bankruptcy risk at the beginning of the period, in 2020, the Altman Z-Score is 1 indicating a significant likelihood of bankruptcy, the same Altman Z-Score value is recorded in 2021, showing no substantial improvement in financial stability, and the condition signals the presence of financial challenges that require increased attention. 45 In 2022, the Altman Z-Score remained at 1 indicating stagnation in efforts to improve financial conditions, the financial ratios remained insufficient to enhance the company’s stability, In 2023, the Altman Z-Score increased to 2, signaling an initial improvement in financial conditions, However, this value still lies within a gray zone, with considerable risk remaining. The Altman Z-Score maintained a value of 2 in 2024, indicating stability at a medium-risk level, Improvements in certain financial ratios, such as profitability and liquidity, became evident during this period, and the stability suggests a positive outlook for the company’s ability to manage financial pressures, further improvements are required to achieve a truly stable and secure financial condition. Overall, Indofood faced high bankruptcy risk at the start of the period but has shown a trend of improvement toward stability, The increase in the Altman Z-Score since 2023 reflects the company’s efforts to enhance its financial condition, Challenges persist, particularly in maintaining long-term progress, strategic financial management is essential to improve financial ratios and strengthen the company’s overall position. Table IV.4 Comparison of the Altman Z-Score Between Unilever, Mayora, and Indofood for the Period 2020–2024 The Altman Z-Score Unilever Mayora Indofood 2020 14 6 1 2021 8 6 1 2022 10 5 1 2023 9 6 2 2024 6 5 2 The Altman Z-Score analysis indicates that Unilever exhibited a more stable financial condition compared to Mayora and Indofood in 2020, Unilever’s Altman Z-Score of 14 reflected a very high level of financial security, far from bankruptcy 46 risk, Mayora recorded a Altman Z-Score of 6, placing the company in a safe zone, Indofood had a Altman Z-Score of 1, signaling a significant bankruptcy risk. In 2021, Unilever’s Altman Z-Score dropped to 8, but it still reflected a relatively secure financial condition, Mayora maintained a Altman Z-Score of 6, indicating stability within the safe zone, Indofood remained at a Altman Z-Score of 1, with no significant improvement in financial stability, and all of these differences highlight the gap in financial risk management among the three companies. In 2022, Unilever’s Altman Z-Score increased to 10, suggesting an improvement in financial management, Mayora’s Altman Z-Score decreased to 5 still placing the company in the safe zone but this decline indicates an increased bankruptcy risk, Indofood continued to record a Altman Z-Score of 1, indicating ongoing challenges in achieving financial stability. In 2023, Unilever’s Altman Z-Score decreased to 9, but it still reflected a strong financial condition, Mayora once again recorded a Altman Z-Score of 6, Indofood’s Altman Z-Score rose to 2 showing an initial improvement in financial stability, though bankruptcy risk remained high, and the trend indicates an early step by Indofood in improving its financial performance. In 2024, Unilever’s Altman Z-Score dropped to 6, placing the company at a higher risk level compared to previous years, Mayora maintained a Altman Z-Score of 5, still showing stability within the safe zone, Indofood’s Altman Z-Score stood at 2, reflecting still-vulnerable financial stability and the comparison shows that Unilever remained ahead overall, however continuous downward fluctuations from 2020 to 2024 would be dangerous if it continues to decline further, increasing the potential for bankruptcy, On the other hand, Mayora shows a stable Altman Z-Score within the safe zone, while Indofood although facing a bankruptcy risk at the beginning of the study year, it continues to improve over time. 47 Figure IV.1 The Trend of Changes in the Altman Z-Score Among Unilever, Mayora, and Indofood During the 2020–2023 Period IV.1.2 Beneish M-Score The Beneish M-Score analysis is utilized to identify the potential for earnings manipulation within a company’s financial statements, and the assessment involves several indicators, including DSRI, GMI, AQI, SGI, DEPI, SGAI, TATA, and LVG, each reflecting a specific aspect of financial management, The Beneish M-Score value provides an overview of the risk level of earnings manipulation, categorized as Green Flag for low risk, Yellow Flag for moderate risk, and Red Flag for high risk, and the study evaluates the financial condition of UNVR during the 2020-2024 period based on the generated Beneish M-Score values, The findings offer a comprehensive understanding of the company’s financial stability and the effectiveness of its financial governance. Table IV.5 The Beneish M-Score of Unilever for period 2020-2024 UN VR (Q3) -4.84 0.92*( DSRI) 0.528*( GMI) 0.404*( AQI) 0.892* (SGI) 0.115*( DEPI) 0.172*( SGAI) 4.679*( TATA) 0.327*( LVG) Beneish M-Score 2020 -4.84 0.9028 0.5238 0.3941 0.8946 0.1037 0.1879 -0.3568 0.3383 -2.9040 2021 -4.84 0.9149 0.5341 0.4094 0.8253 0.1022 0.1767 -0.5731 0.3478 -3.1517 2022 -4.84 0.7655 0.5381 0.3839 0.9368 0.1064 0.1575 -0.7443 0.3183 -3.3294 2023 -4.84 0.8239 0.5187 0.4128 0.8628 0.1089 0.1955 -0.5484 0.3264 -3.1832 2024 -4.84 0.6185 0.5337 0.4799 0.8017 0.1136 0.1825 -0.2254 0.3620 -3.0625 48 The Beneish M-Score analysis of Unilever from 2020 to 2024 demonstrates financial stability with low earnings manipulation risk, in 2020, the Beneish M- Score of -2.9040 placed the company in the Green Flag category indicating minimal earnings manipulation risk, indicators such as DSRI at 0.9028 and GMI at 0.5238 supported this result, reflecting strong operational efficiency, the TATA component of -0.3568 further emphasized the absence of significant signs of accounting manipulation. In 2021, the Beneish M-Score improved to -3.1517, remaining in the Green Flag category. DSRI rose to 0.9149, reflecting more efficient management of receivables, the TATA indicator of -0.5731 reinforced the low earnings manipulation risk assessment, other indicators such as AQI at 0.4094 and SGI at 0.8253, demonstrated sustained operational efficiency. The Beneish M-Score further improved in 2022 to -3.3294, staying in the Green Flag category, DSRI decreased to 0.7655 indicating more conservative sales management, he TATA value of -0.7443 further confirmed the absence of earnings manipulation potential, the SGI of 0.9368 signaled controlled and consistent revenue growth. In 2023, the Beneish M-Score slightly decreased to -3.1832, still within the Green Flag category. DSRI increased to 0.8239, supporting the efficient management of receivables. The TATA indicator remained at -0.5484, maintaining a low earnings manipulation risk. AQI of 0.4128 and SGI of 0.8628 reflected consistent financial performance and stable growth. Table IV.6 The Beneish M-Score of Mayora for period 2020-2024 MY OR (Q3) -4.84 0.92*( DSRI) 0.528*( GMI) 0.404*( AQI) 0.892* (SGI) 0.115*( DEPI) 0.172*( SGAI) 4.679*( TATA) 0.327*( LVG) Beneish M-Score 2020 -4.84 0.8013 0.5288 0.4376 0.8732 0.1260 0.1688 -0.4530 0.2792 -2.9740 2021 -4.84 0.9011 0.5420 0.3907 1.0090 0.1090 0.1642 -0.0436 0.3416 -2.4374 2022 -4.84 0.9206 0.5408 0.3767 0.9970 0.1089 0.1385 0.1387 0.3409 -2.2367 2023 -4.84 0.9075 0.5122 0.4756 0.9186 0.1154 0.1689 -0.3648 0.2775 -2.7217 2024 -4.84 0.9547 0.5367 0.3609 0.9990 0.1261 0.1566 0.1431 0.3857 -2.2618 49 The Beneish M-Score analysis of Mayora from 2020 to 2024 reveals relatively low earnings manipulation risk, though with some variations, in 2020 the Beneish M- Score of -2.9740 placed the company in the Green Flag category, indicating a low risk of earnings manipulation, the DSRI value of 0.8013 and the TATA of -0.4530 reflect efficient receivables management and minimal indications of accounting manipulation, the stability of the AQI at 0.4376 supports this assessment indicating strong asset control. In 2021 the Beneish M-Score decreased to -2.4374 still within the Green Flag category, DSRI rose to 0.9011 reflecting more optimized sales management, the TATA indicator of -0.0436 suggests controlled earnings management despite a decline in stability, the SGI value of 1.0090 indicates significant yet controlled revenue growth. In 2022, the Beneish M-Score further declined to -2.2367, remaining within the Green Flag category, DSRI reached 0.9206, showing continued efficiency in receivables management. The TATA value of 0.1387 points to a slight increase in the potential for earnings manipulation compared to the previous year, the stability of AQI at 0.3767 and SGI at 0.9970 reflects the consistency in the company’s financial management. In 2023 the Beneish M-Score improved to -2.7217, returning to the Green Flag category. DSRI stood at 0.9075, reflecting continued efficiency in receivables management, the TATA value of -0.3648 once again indicates minimal signs of earnings manipulation, the AQI at 0.4756 and SGI at 0.9186 reflect the ongoing operational stability of the company. Table IV.7 The Beneish M-Score of Indofood for period 2020-2024 INDF (Q3) -4.84 0.92*( DSRI) 0.528*( GMI) 0.404* (AQI) 0.892* (SGI) 0.115*( DEPI) 0.172*( SGAI) 4.679*( TATA) 0.327*( LVG) Beneish M-Score 2020 -4.84 1.1005 0.5198 0.4699 0.9063 0.1115 0.1781 -0.1994 0.3758 -2.4854 2021 -4.84 0.8043 0.5248 0.3817 1.1050 0.1115 0.1558 -0.1336 0.3172 -2.5194 2022 -4.84 0.9427 0.5344 0.3796 0.9902 0.1087 0.1509 -0.1290 0.3189 -2.4832 50 2023 -4.84 0.9366 0.5274 0.3942 0.9258 0.1105 0.1717 -0.0715 0.3066 -2.4952 2024 -4.84 0.9448 0.5188 0.3824 0.9245 0.1095 0.1848 -0.0766 0.3092 -2.5306 The Beneish M-Score analysis of Indofood from 2020 to 2024 demonstrates consistent low risk of earnings manipulation. In 2020, the Beneish M-Score of - 2.4854 placed the company in the Green Flag category. The DSRI indicator of 1.1005 suggests an improvement in receivables management, though caution is necessary regarding potential manipulation. The TATA value of -0.1994 reflects stable earnings management, with no significant signs of manipulation. In 2021, the Beneish M-Score remained in the Green Flag category, recording a value of -2.5194, indicating low risk. The DSRI decreased to 0.8043, demonstrating more efficient management of receivables than the previous year. The SGI value of 1.1050 showed significant revenue growth, while staying within controlled limits. The TATA value of -0.1336 reflected stable earnings without indications of manipulation. In 2022, the Beneish M-Score slightly improved to -2.4832, still within the Green Flag category. The DSRI rose to 0.9427, signifying an increase in receivables management efficiency. The TATA value of -0.1290 indicated maintained earnings stability. The SGI value of 0.9902 and AQI value of 0.3796 reflected operational stability and strong asset management. For 2023 and 2024, the Beneish M-Scores recorded values of -2.4952 and -2.5306, respectively, both indicating low earnings manipulation risk, the DSRI for 2024 is 0.9448, demonstrating consistency in receivables management efficiency, the TATA value of -0.0766 reflected maintained earnings stability despite a slight decline, all of these values reflect a solid financial position with efficient and transparent financial management. 51 Table IV.8 Comparison of the Beneish M-Score Between Unilever, Mayora, and Indofood for the Period 2020–2024 Beneish M-Score Unilever Mayora Indofood 2020 -2.9040 -2.9740 -2.4854 2021 -3.1517 -2.4374 -2.5194 2022 -3.3294 -2.2367 -2.4832 2023 -3.1832 -2.7217 -2.4952 2024 -3.0625 -2.2618 -2.5306 In 2020, Unilever recorded the lowest Beneish M-Score among the three companies at -2.9040, indicating it falls within the green flag category (M-score < -2.22), suggesting an unlikely chance of earning manipulation, Mayora’s M-score was - 2.9740, also within the green flag range, reflecting high transparency in its financial reporting, Indofood’s Beneish M-Score of -2.4854 likewise fell into the green flag range, indicating stable financial management without significant risk of manipulation. In 2021, Unilever’s Beneish M-Score further improved to -3.1517, remaining in the green flag category, Mayora’s score was -2.4374, also staying in the green flag range, Indofood’s Beneish M-Score of -2.5194 continued to reflect a low risk of earnings manipulation, and this consistent trend across all companies suggests a low probability of earnings manipulation for the period. In 2022, the trend persisted, with Unilever recording the lowest Beneish M-Score among the three companies at -3.3294, Mayora’s score was -2.2367, barely remaining within the green flag category but still indicating a low likelihood of manipulation, Indofood’s Beneish M-Score improved slightly to -2.4832, confirming its financial stability. In 2023, Unilever’s M-Score was -3.1832, still well within the green flag range, Mayora’s score decreased to -2.7217, maintaining strong financial stability, Indofood’s score was -2.4952, reflecting a consistent pattern of unlikely earnings manipulation risk across the observed companies.