False Recovery in Financial Distress Prediction: Evidence from Altman Z″-Score EMS at PT Supra Boga Lestari Tbk 2022-2025
- 1*,2,3 Universitas Muhammadiyah Cirebon
* Corresponding Author: Siti Sumayyah
Open AccessAbstract
Financial distress prediction models remain vulnerable to misclassification when firms report significant non-recurring income that obscures deteriorating operational fundamentals. In order to determine whether a 2024 improvement in the Altman Z-Score Emerging Market Scoring (EMS) signal truly reflects operational recovery or is distorted by transitory income, this study examines a false recovery phenomenon in PT Supra Boga Lestari Tbk (RANC), an Indonesian premium retailer undergoing digital transformation. The study calculates annual Z-Score values and does a what-if restatement analysis using audited financial data from the Indonesia Stock Exchange covering 2022–2025 using a quantitative descriptive single-case design. The findings verify that RANC spent the entire time in the financial difficulty zone. Crucially, the apparent improvement in 2024 was accompanied by a 42.7 percent drop in operating cash flow, which was caused by a non-recurring disposal gain of Rp110.7 billion that concurrently inflated total assets and earnings. A paradoxical Z-Score of 2.1546 (grey zone) was obtained from a what-if restatement that excluded this gain. This revealed a structural conundrum in which, when transient revenue is present, the model's component interactions generate noise rather than trustworthy diagnostic signals. These results show that gains in Z-Score may be a deceptive recovery signal that is unrelated to actual operational health. It is recommended that investors and analysts add operating cash flow analysis and earnings quality screening to distress model results, especially for companies going through post-acquisition digital transformation.
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Author Biographies
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Siti Sumayyah, Universitas Muhammadiyah Cirebon
Management Study Program, The Faculty of Economics and Business, Universitas Muhammadiyah Cirebon, Cirebon City, West Java Province, Indonesia.
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Ali Jufri, Universitas Muhammadiyah Cirebon
Management Study Program, The Faculty of Economics and Business, Universitas Muhammadiyah Cirebon, Cirebon City, West Java Province, Indonesia.
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Ernanto, Universitas Muhammadiyah Cirebon
Management Study Program, The Faculty of Economics and Business, Universitas Muhammadiyah Cirebon, Cirebon City, West Java Province, Indonesia.
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