Analysis Of Factors Affecting Capital Structure And Its Implications To Own Capital Profitability In The Textile Industry That Go Public In Indonesia

Feb 27, 2025 by ADMIN 150 views

Analysis of Factors Affecting Capital Structure and Its Implications to Own Capital Profitability in the Textile Industry that Go Public in Indonesia

Market Globalization and the Textile Industry in Indonesia

The textile industry in Indonesia has been facing significant challenges in recent years, triggered by market globalization and technological developments. The industry, which was once known for its labor-intensive nature, has seen a decline in production and exports, resulting in decreased company profits. In 2001, the industry experienced a significant downturn, which highlighted the need for textile companies to find innovative solutions to survive and grow. One of the key strategies that textile companies can employ to overcome these challenges is through the right funding strategy.

The Importance of Capital Structure in the Textile Industry

Capital structure refers to the mix of debt and equity used by a company to finance its operations. It is a critical component of a company's financial strategy, as it can have a significant impact on its financial performance. In the textile industry, capital structure is particularly important, as companies need to balance their funding requirements with the need to maintain a stable financial position. A well-structured capital base can provide textile companies with the necessary funds to invest in new technologies, expand their operations, and improve their competitiveness.

Objectives of the Study

This study aims to analyze the factors that affect the capital structure and its impact on the profitability of own capital on textile companies listed on the Jakarta Stock Exchange. The study has two main objectives:

Analyzing the Relationship between Asset Structure, Sales Growth, Company Size, Tax, and Retained Earnings with Capital Structure

This objective aims to examine the relationship between asset structure, sales growth, company size, tax, and retained earnings with capital structure. The study will use multiple regression analysis to test the relationship between these variables and capital structure.

Analyzing the Relationship between Capital Structure, Return on Total Assets, and Interest Rates with Own Capital Profitability

This objective aims to examine the relationship between capital structure, return on total assets, and interest rates with own capital profitability. The study will use multiple regression analysis to test the relationship between these variables and own capital profitability.

Methodology

This study uses data from 16 textile companies listed on the Jakarta Stock Exchange. The data includes information on asset structure, sales growth, company size, tax, retained earnings, capital structure, return on total assets, and interest rates. The study applies multiple regression analysis to test the relationship between the variables.

Results

The results of the study show that:

Simultaneously, the five independent variables (asset structure, sales growth, company size, tax, and retained earnings) have a significant relationship with the capital structure.

This finding suggests that all five independent variables have a significant impact on capital structure. The study's results indicate that asset structure, sales growth, company size, tax, and retained earnings are all important factors that influence capital structure.

Partially, only the tax level has a significant relationship with the capital structure.

This finding suggests that tax level is the only independent variable that has a significant impact on capital structure. The study's results indicate that tax level is a critical factor that influences capital structure.

Simultaneously, the three independent variables (capital structure, return on total assets, and interest rates) have a significant relationship with their own capital profitability.

This finding suggests that all three independent variables have a significant impact on own capital profitability. The study's results indicate that capital structure, return on total assets, and interest rates are all important factors that influence own capital profitability.

Partially, only return on total assets that do not have a significant relationship with the profitability of their own capital.

This finding suggests that return on total assets does not have a significant impact on own capital profitability. The study's results indicate that return on total assets is not a critical factor that influences own capital profitability.

Implications and Recommendations

This study provides a number of implications for textile companies, especially those that go public:

Attention to the capital structure: The company needs to pay close attention to its capital structure and understand how factors such as taxes, sales growth, and company size can affect it.
Management of Return on Total Assets: Increasing Return on Total Assets is the main key in increasing their own capital profitability. Companies need to focus on operational efficiency and strategies that can increase asset profitability.
Optimizing Funding Strategy: Textile companies need to design the right funding strategy to maximize financial performance. This involves the selection of appropriate funding sources, regulating debt and equity ratios, and efficient allocation of funds.

Conclusion

This study provides a strong basis for textile companies to conduct further analysis related to the capital structure and own capital profitability. By understanding the factors that influence the two variables, companies can take strategic steps to improve future performance and competitiveness. The study's findings highlight the importance of capital structure and its impact on own capital profitability, and provide textile companies with valuable insights into how to optimize their funding strategy and improve their financial performance.
Frequently Asked Questions (FAQs) about Capital Structure and Own Capital Profitability in the Textile Industry

Q: What is capital structure, and why is it important for textile companies?

A: Capital structure refers to the mix of debt and equity used by a company to finance its operations. It is a critical component of a company's financial strategy, as it can have a significant impact on its financial performance. In the textile industry, capital structure is particularly important, as companies need to balance their funding requirements with the need to maintain a stable financial position.

Q: What are the key factors that affect capital structure in the textile industry?

A: The key factors that affect capital structure in the textile industry include asset structure, sales growth, company size, tax, and retained earnings. These factors can have a significant impact on a company's capital structure and its ability to finance its operations.

Q: How does capital structure impact own capital profitability in the textile industry?

A: Capital structure can have a significant impact on own capital profitability in the textile industry. A well-structured capital base can provide textile companies with the necessary funds to invest in new technologies, expand their operations, and improve their competitiveness. Conversely, a poorly structured capital base can lead to financial difficulties and reduced profitability.

Q: What is the relationship between return on total assets and own capital profitability in the textile industry?

A: The study found that return on total assets has a significant impact on own capital profitability in the textile industry. Companies that are able to achieve high returns on their total assets are more likely to experience high profitability.

Q: How can textile companies optimize their funding strategy to improve their financial performance?

A: Textile companies can optimize their funding strategy by selecting the right funding sources, regulating debt and equity ratios, and efficiently allocating funds. This can help companies to achieve a well-structured capital base and improve their financial performance.

Q: What are the implications of the study's findings for textile companies?

A: The study's findings have important implications for textile companies. Companies need to pay close attention to their capital structure and understand how factors such as taxes, sales growth, and company size can affect it. They also need to focus on operational efficiency and strategies that can increase asset profitability.

Q: How can textile companies use the study's findings to improve their financial performance?

A: Textile companies can use the study's findings to improve their financial performance by:

Paying close attention to their capital structure and understanding how factors such as taxes, sales growth, and company size can affect it.
Focusing on operational efficiency and strategies that can increase asset profitability.
Selecting the right funding sources and regulating debt and equity ratios.
Efficiently allocating funds to achieve a well-structured capital base.

Q: What are the limitations of the study, and how can they be addressed in future research?

A: The study has several limitations, including the use of a small sample size and the reliance on secondary data. Future research can address these limitations by using a larger sample size and collecting primary data. Additionally, future research can explore other factors that may affect capital structure and own capital profitability in the textile industry.

Q: What are the future research directions for this study?

A: Future research directions for this study include:

Exploring the impact of other factors on capital structure and own capital profitability in the textile industry.
Investigating the relationship between capital structure and other financial performance metrics, such as return on equity and return on investment.
Conducting a longitudinal study to examine the impact of changes in capital structure on own capital profitability over time.