Leverage, liquidity, and working capital efficiency affect manufacturing companies' profitability on the IDX
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Nov 1, 2023
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Abstract
The development of manufacturing companies in Indonesia is currently ongoing. However, many businesses still have profitability issues due to poor asset management. This affects a company's leverage, liquidity, and working capital. This study analyzes the role of leverage, liquidity, and working capital efficiency in influencing manufacturing companies' profitability on the Indonesian stock exchange (IDX). Quantitative research utilizing secondary data obtained from the IDX related to companies engaged in manufacturing. The total sampling technique, which included 500 companies, determined the research sample. The data were analyzed using multiple linear regression. Profitability is an essential aspect of a company's ability to obtain expected results. Various predictors affect profitability, including leverage, liquidity, and working capital efficiency. The findings show that leverage, liquidity, and working capital effectiveness can affect profitability by 9% with a probability of 0.000 (p<0.05). The equation is Y= -2.861+ 0.459 X1 -0.218X2 + 0.304X3 + e. As a result, leverage and working capital efficiency can positively and significantly affect profitability but not liquidity.
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How to Cite
Hutnaleontina, P. N., Padnyawati, K. D., & Dewi, I. G. A. T. C. (2023). Leverage, liquidity, and working capital efficiency affect manufacturing companies’ profitability on the IDX. Enrichment : Journal of Management, 13(4), 2689-2698. https://doi.org/10.35335/enrichment.v13i4.1631
References
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Bramaputra, E. D., Musfitria, A., & Triastuti, Y. (2022). The Effect of Liquidity, Leverage, Company Growth, and Profitability on Dividend Policy in Food and Beverage Manufacturing Companies Listed on the Indonesia Stock Exchange for the Period 2013-2015. El-Mal: Jurnal Kajian Ekonomi & Bisnis Islam, 3(3), 424–439. https://doi.org/10.47467/elmal.v3i3.901
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Demiraj, R., Dsouza, S., & Abiad, M. (2022). Working Capital Management Impact on Profitability: Pre-Pandemic and Pandemic Evidence from the European Automotive Industry. Risks, 10(12), 236. https://doi.org/10.3390/risks10120236
Ehiedu, V. C. Ph. D., & Imoagwu Chika Priscilla2 (Ph.D). (2022). Firm Specific Determinants and Its Implication on Listed Oil and Gas Firms Profitability in Nigeria. International Journal of Advanced Economics, 4(7), 142–158. https://doi.org/10.51594/ijae.v4i7.389
Falim, A. I., Andika, M., Aditya, D., & Saputra, R. (2023). The Effect of Working Capital, and Liquidity on Profitability of Manufacturing Companies in the Consumer Goods Industry Sector on the Indonesia Stock Exchange for the Period 2018-2022. Jurnal Manajemen Riset Inovasi (MRI), 1(3), 107–118. https://doi.org/10.55606/mri.v1i3.1295
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Halim, K. I., Olivia, V., & Novianty, N. (2022). The Effect of Environmental Performance, Capital Structure, and Working Capital Turnover on Profitability in Mining Sector Companies. Jurnal Revenue: Jurnal Ilmiah Akuntansi, 3(1), 157–164. https://doi.org/10.46306/rev.v3i1.85
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Kim, Y., Jung, S., & Kim, C. (2023). The Impact of Capital Structure on the Profitability Performance of ICT Firms. Processes, 11(2), 635. https://doi.org/10.3390/pr11020635
Lumbantobing, R. (2020). The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange. Proceedings of the 6th Annual International Conference on Management Research (AICMaR 2019). https://doi.org/10.2991/aebmr.k.200331.014
Mandipa, G., & Sibindi, A. B. (2022). Financial performance and working capital management practices in the retail sector: empirical evidence from South Africa. Risks, 10(3), 63. https://doi.org/10.3390/risks10030063
Mazanec, J. (2022). The Impact of Working Capital Management on Corporate Performance in Small–Medium Enterprises in the Visegrad Group. Mathematics, 10(6), 951. https://doi.org/10.3390/math10060951
Mufti, M. A., Awan, Z. H., & Islam, J. (2023). Examining The Critical Role of Working Capital Management and Capital Structure on Financial Performance of Manufacturing Firms: An Empirical Assessment. International Journal of Business and Economic Affairs, 8(3), 192–199. https://doi.org/10.24088/IJBEA-2023-830015
Munandar, A., Huda, N., & Arirangga, M. V. (2019). Efficiency of Working Capital Utilization at PT Holcim Indonesia Tbk. Jurnal Manajemen Dan Keuangan, 8(1), 89–98. https://doi.org/10.33059/jmk.v8i1.1306
Ningsih, S. A. (2021). The Effect of Liquidity Ratio, Solvency Ratio and Sales Growth on Profitability in Pharmaceutical Companies for the Period 2014-2019. JAPP: Jurnal Akuntansi, Perpajakan, dan Portofolio, 1(2), 123–131. https://doi.org/10.2426/10.24269
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Prabhasyahrani, A., & Khuzaini. (2022). The effect of working capital turnover, liquidity, and solvency on profitability with company size as a moderating variable. Jurnal Ilmu dan Riset Manajemen, 11(4), 189–197. http://jurnalmahasiswa.stiesia.ac.id/index.php/jirm/article/view/4461
Pradnyaswari, N. M. A. D., & Dana, I. M. (2022). The Effect of Liquidity, Capital Structure, Company Size, and Leverage on Profitability in Automotive Sub-Sector Companies. E-Jurnal Manajemen Universitas Udayana, 11(3), 505. https://doi.org/10.24843/EJMUNUD.2022.v11.i03.p05
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Rahmi, E. K. K., & Zulfitra, Z. (2022). The Effect of Working Capital Turnover on Profitability at PT Intikeramik Alamasri Indonesia Tbk for the Period 2013-2020. Jurnal Ekonomi Efektif, 4(2), 210. https://doi.org/10.32493/JEE.v4i2.17121
Sandra Dewi, R. (2020). The Effect of Leverage, Liquidity, Working Capital Turnover, and Sales Growth on Profitability. Jurnal Ilmu Riset Dan Akuntansi. 9(12),3766. http://jurnalmahasiswa.stiesia.ac.id/index.php/jira/article/view/3766
Sembiring, S., Sinaga, R. V., & Lase, B. (2022). The Effect of Leverage, Liquidity and Profitability on Dividend Policy of Property and Real Estate Companies Listed on the Indonesia Stock Exchange for the 2017-2019. Jurnal Riset Akuntansi & Keuangan, 8(1), 141–155. https://doi.org/10.54367/jrak.v8i1.1763
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Shalini, W., Christianty, R., & Pattinaja, E. M. (2022). The Effect of Working Capital Management, Liquidity and Leverage on Profitability in Consumer Goods Companies on the Indonesia Stock Exchange for the 2017-2020. Owner: Riset & Jurnal Akuntansi, 6(2), 1841–1851. https://doi.org/10.33395/owner.v6i2.823
Soda, M. Z., Hassan Makhlouf, M., Oroud, Y., & Al Omari, R. (2022). Is firms’ profitability affected by working capital management? A novel market-based evidence in Jordan. Cogent Business & Management, 9(1), 2049671. https://doi.org/10.1080/23311975.2022.2049671
Sudarno, S. P. (2022). Teori Penelitian Keuangan. CV Literasi Nusantara Abadi.
Suryani, E., Napitupulu, A., & Federick, H. W. (2022). Analysis of the Effect of Current Ratio and Debt To Equity Ratio on Profitability (Return on Equity) at PT Ramayana Lestari Sentosa Tbk Period. Jurnal Akuntansi & Perpajakan, 4(1), 1–22. https://doi.org/10.53825/japjayakarta.v4i1.140
Wibowo, S. N., Siregar, N. F., & Febriansyah, R. (2023). Determinant tax aggressiveness in Indonesia: The Influence of Profitability, Leverage, and Liquidity. Research Trend in Technology and Management, 1(22), 33–43. https://doi.org/10.56442/rttm.v1i22.10
Adnyana, I. M. D. M., & Sudaryati, N. L. G. (2022). The potency of green education-based blended learning in biology students at the Hindu University of Indonesia. BIO-INOVED: Jurnal Biologi-Inovasi Pendidikan, 4(1), 1–9. https://doi.org/10.20527/bino.v4i1.11047
Ahmad, M., Bashir, R., & Waqas, H. (2022). Working capital management and firm performance: are their effects same in covid 19 compared to financial crisis 2008? Cogent Economics & Finance, 10(1), 2101224. https://doi.org/10.1080/23322039.2022.2101224
Bramaputra, E. D., Musfitria, A., & Triastuti, Y. (2022). The Effect of Liquidity, Leverage, Company Growth, and Profitability on Dividend Policy in Food and Beverage Manufacturing Companies Listed on the Indonesia Stock Exchange for the Period 2013-2015. El-Mal: Jurnal Kajian Ekonomi & Bisnis Islam, 3(3), 424–439. https://doi.org/10.47467/elmal.v3i3.901
Darwin, M., Mamondol, M. R., Sormin, S. A., Nurhayati, Y., Tambunan, H., Sylvia, D., Adnyana, I. M. D. M., Prasetiyo, B., Vianitati, P., & Gebang, A. A. (2021). Quantitative approach research method (T. S. Tambunan, Ed.; 1st ed.). CV Media Sains Indonesia.
Demiraj, R., Dsouza, S., & Abiad, M. (2022). Working Capital Management Impact on Profitability: Pre-Pandemic and Pandemic Evidence from the European Automotive Industry. Risks, 10(12), 236. https://doi.org/10.3390/risks10120236
Ehiedu, V. C. Ph. D., & Imoagwu Chika Priscilla2 (Ph.D). (2022). Firm Specific Determinants and Its Implication on Listed Oil and Gas Firms Profitability in Nigeria. International Journal of Advanced Economics, 4(7), 142–158. https://doi.org/10.51594/ijae.v4i7.389
Falim, A. I., Andika, M., Aditya, D., & Saputra, R. (2023). The Effect of Working Capital, and Liquidity on Profitability of Manufacturing Companies in the Consumer Goods Industry Sector on the Indonesia Stock Exchange for the Period 2018-2022. Jurnal Manajemen Riset Inovasi (MRI), 1(3), 107–118. https://doi.org/10.55606/mri.v1i3.1295
Fitriana, R., Priatna, H., & Barokah, A. (2022). Pengaruh Likuiditas dan Solvabilitas Terhadap Profitabilitas Pada PT. Perkebunan Nusantara VIII. AKURAT| Jurnal Ilmiah Akuntansi FE UNIBBA, 13(02), 1–11. https://unibba.ac.id/ejournal/index.php/akurat/article/view/907
Habib, A., Khan, M. A., Popp, J., & Rákos, M. (2022). The Influence of Operating Capital and Cash Holding on Firm Profitability. Economies, 10(3), 69. https://doi.org/10.3390/economies10030069
Halim, K. I., Olivia, V., & Novianty, N. (2022). The Effect of Environmental Performance, Capital Structure, and Working Capital Turnover on Profitability in Mining Sector Companies. Jurnal Revenue: Jurnal Ilmiah Akuntansi, 3(1), 157–164. https://doi.org/10.46306/rev.v3i1.85
Hidayat, I., & Dewi, F. O. S. (2022). Effect of Liquidity, Leverage, and Working Capital Turn on Profitability. APTISI Transactions on Management (ATM), 7(1), 60–68. https://doi.org/10.33050/atm.v7i1.1832
IDX. (2023). Financial Data and Ratio - Maret 2023. Financial report and ratio of listed companies. https://idx.co.id/id/data-pasar/laporan-statistik/digital-statistic/monthly/financial-report-and-ratio-of-listed-companies/financial-data-and-ratio?filter=eyJ5ZWFyIjoiMjAyMyIsIm1vbnRoIjoiMyIsInF1YXJ0ZXIiOjAsInR5cGUiOiJtb250aGx5In0%3D
Kasmir, K. (2016). Analisis Laporan Keuangan, edisi pertama. Jakarta: PT Raja Grafindo Persada.
Khairunnisa, K., & Fitria, Y. (2023). The effect of working capital turnover, sales growth and liquidity on profitability in agricultural sector companies listed on the Indonesia Stock Exchange. Jurnal Ilmu Akuntansi Mulawarman (JIAM), 8(1), 10590. https://doi.org/10.30872/jiam.v8i1.10590
Kim, Y., Jung, S., & Kim, C. (2023). The Impact of Capital Structure on the Profitability Performance of ICT Firms. Processes, 11(2), 635. https://doi.org/10.3390/pr11020635
Lumbantobing, R. (2020). The Effect of Financial Ratios on the Possibility of Financial Distress in Selected Manufacturing Companies Which Listed in Indonesia Stock Exchange. Proceedings of the 6th Annual International Conference on Management Research (AICMaR 2019). https://doi.org/10.2991/aebmr.k.200331.014
Mandipa, G., & Sibindi, A. B. (2022). Financial performance and working capital management practices in the retail sector: empirical evidence from South Africa. Risks, 10(3), 63. https://doi.org/10.3390/risks10030063
Mazanec, J. (2022). The Impact of Working Capital Management on Corporate Performance in Small–Medium Enterprises in the Visegrad Group. Mathematics, 10(6), 951. https://doi.org/10.3390/math10060951
Mufti, M. A., Awan, Z. H., & Islam, J. (2023). Examining The Critical Role of Working Capital Management and Capital Structure on Financial Performance of Manufacturing Firms: An Empirical Assessment. International Journal of Business and Economic Affairs, 8(3), 192–199. https://doi.org/10.24088/IJBEA-2023-830015
Munandar, A., Huda, N., & Arirangga, M. V. (2019). Efficiency of Working Capital Utilization at PT Holcim Indonesia Tbk. Jurnal Manajemen Dan Keuangan, 8(1), 89–98. https://doi.org/10.33059/jmk.v8i1.1306
Ningsih, S. A. (2021). The Effect of Liquidity Ratio, Solvency Ratio and Sales Growth on Profitability in Pharmaceutical Companies for the Period 2014-2019. JAPP: Jurnal Akuntansi, Perpajakan, dan Portofolio, 1(2), 123–131. https://doi.org/10.2426/10.24269
Paulus, A. Y., Sulaeman, Mayasari, A. C., Ayu, J. D., Musniati, N., Sari, M. P., Hamdan, D. F., Farid, A., Selly, J. B., Amalia, N., Aulia, U., & Adnyana, I. M. D. M. (2023). Biostatistika Epidemiologi (H. Akbar, Ed.; 1st ed., Issue 1). CV. Media Sains Indonesia.
Prabhasyahrani, A., & Khuzaini. (2022). The effect of working capital turnover, liquidity, and solvency on profitability with company size as a moderating variable. Jurnal Ilmu dan Riset Manajemen, 11(4), 189–197. http://jurnalmahasiswa.stiesia.ac.id/index.php/jirm/article/view/4461
Pradnyaswari, N. M. A. D., & Dana, I. M. (2022). The Effect of Liquidity, Capital Structure, Company Size, and Leverage on Profitability in Automotive Sub-Sector Companies. E-Jurnal Manajemen Universitas Udayana, 11(3), 505. https://doi.org/10.24843/EJMUNUD.2022.v11.i03.p05
Prasetia, A., Rumiasih, N., Riani, D., Arial Mubarok Program Studi Akuntansi, A., Ekonomi dan Bisnis Universitas Ibn Khaldun, F., Jl Sholeh Iskandar, B., Tanah Sereal, K., & Barat, J. (2022). The Effect of Working Capital on Lending and its Impact on the Profitability of Kokaryasa Cooperative in the Period 2011 - 2020. Inovator: Jurnal Manajemen, 11(1), 255–264. http://ejournal.uika-bogor.ac.id/index.php/INOVATOR/article/view/6908
Rahmi, E. K. K., & Zulfitra, Z. (2022). The Effect of Working Capital Turnover on Profitability at PT Intikeramik Alamasri Indonesia Tbk for the Period 2013-2020. Jurnal Ekonomi Efektif, 4(2), 210. https://doi.org/10.32493/JEE.v4i2.17121
Sandra Dewi, R. (2020). The Effect of Leverage, Liquidity, Working Capital Turnover, and Sales Growth on Profitability. Jurnal Ilmu Riset Dan Akuntansi. 9(12),3766. http://jurnalmahasiswa.stiesia.ac.id/index.php/jira/article/view/3766
Sembiring, S., Sinaga, R. V., & Lase, B. (2022). The Effect of Leverage, Liquidity and Profitability on Dividend Policy of Property and Real Estate Companies Listed on the Indonesia Stock Exchange for the 2017-2019. Jurnal Riset Akuntansi & Keuangan, 8(1), 141–155. https://doi.org/10.54367/jrak.v8i1.1763
Setyawan, M. F., Mertaniasih, N. M., Utomo, B., Soedarsono, S., Adnyana, I. M. D. M., Eljatin, D. S., Sumah, L. H. M., Karina, C. Al, & Nuha, Z. (2023). An Analysis of The Trend of Incidences and Fatality of Pulmonary Tuberculosis in East Java from 2015-2020: A Lesson From COVID-19. National Journal of Community Medicine, 14(5), 308–315. https://doi.org/10.55489/njcm.140520232903
Shalini, W., Christianty, R., & Pattinaja, E. M. (2022). The Effect of Working Capital Management, Liquidity and Leverage on Profitability in Consumer Goods Companies on the Indonesia Stock Exchange for the 2017-2020. Owner: Riset & Jurnal Akuntansi, 6(2), 1841–1851. https://doi.org/10.33395/owner.v6i2.823
Soda, M. Z., Hassan Makhlouf, M., Oroud, Y., & Al Omari, R. (2022). Is firms’ profitability affected by working capital management? A novel market-based evidence in Jordan. Cogent Business & Management, 9(1), 2049671. https://doi.org/10.1080/23311975.2022.2049671
Sudarno, S. P. (2022). Teori Penelitian Keuangan. CV Literasi Nusantara Abadi.
Suryani, E., Napitupulu, A., & Federick, H. W. (2022). Analysis of the Effect of Current Ratio and Debt To Equity Ratio on Profitability (Return on Equity) at PT Ramayana Lestari Sentosa Tbk Period. Jurnal Akuntansi & Perpajakan, 4(1), 1–22. https://doi.org/10.53825/japjayakarta.v4i1.140
Wibowo, S. N., Siregar, N. F., & Febriansyah, R. (2023). Determinant tax aggressiveness in Indonesia: The Influence of Profitability, Leverage, and Liquidity. Research Trend in Technology and Management, 1(22), 33–43. https://doi.org/10.56442/rttm.v1i22.10