The Role of Financial Ratios in Assessing Going Concern Uncertainty: Evidence from Capital Markets in the 2019 - 2023

Abstract

This study investigates the role of financial ratios in assessing going concern uncertainty, with a particular focus on capital markets during the period of 2019 to 2023. Utilizing a qualitative approach through literature review and library research, the research examines existing theories and empirical studies that explore how financial ratios, such as liquidity, profitability, solvency, and leverage ratios, are used to evaluate a company's ability to continue its operations without significant financial distress. The study reviews relevant academic literature and financial reports to identify key financial indicators that have proven to be critical in forecasting going concern issues. The period of analysis, 2019 to 2023, includes significant economic events such as the COVID-19 pandemic, which impacted global markets and further highlighted the importance of financial ratio analysis in uncertain economic conditions. Findings indicate that while certain ratios consistently provide insights into a company's financial health, the unprecedented market fluctuations during this period have led to a more complex interpretation of these ratios. The study contributes to the literature by providing a synthesized understanding of the reliability and limitations of financial ratios in the context of capital market uncertainties. It emphasizes the need for comprehensive assessments, combining financial and non-financial data, to better predict going concern uncertainties in volatile market conditions.