Analysis Of Factors Affecting Profit Growth In Manufacturing Companies Listed On The Indonesia Stock Exchange
Analysis of Factors Affecting Profit Growth in Manufacturing Companies Listed on the Indonesia Stock Exchange
Introduction
The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a significant number of manufacturing companies listed on it. The growth of earnings in these companies is a crucial factor in determining their financial performance and ultimately, their value to investors. However, the factors that influence the growth of earnings in manufacturing companies listed on the IDX are not well understood. This study aims to reveal the factors that influence the growth of earnings in manufacturing companies listed on the IDX.
Literature Review
Previous studies have identified several factors that influence the growth of earnings in manufacturing companies. These factors include the current ratio, debt to equity ratio, and total asset turnover. The current ratio is a measure of a company's ability to fulfill its short-term obligations, while the debt to equity ratio measures the ratio of debt to the company's equity. The total asset turnover, on the other hand, shows the company's efficiency in utilizing its assets to generate sales.
Methodology
This study uses secondary data from the annual financial statements of 32 manufacturing companies listed on the IDX during the 2017-2020 period. The data is analyzed using the Panel Data Regression Technique to examine the relationship between the selected variables.
Results
The results of this study show that three variables, namely the current ratio, debt to equity ratio, and total asset turnover, have a significant influence on profit growth. A further analysis of the effect of each variable is presented below.
Current Ratio
The current ratio is a measure of a company's ability to fulfill its short-term obligations. The results showed that the current ratio had a negative and insignificant influence on earnings growth. This indicates that even though the company has a good ability to fulfill its short-term obligations, this does not necessarily have a positive impact on profit growth.
Debt to Equity Ratio
The debt to equity ratio measures the ratio of debt to the company's equity, which shows how much the company uses debt to finance its operations. The results showed that the debt to equity ratio has a negative and significant influence on earnings growth. That is, the higher the debt to equity ratio, the lower the company's profit growth. This may be caused by high debt costs or larger financial risk faced by companies with capital structures that are too dependent on debt.
Total Asset Turnover
The total asset turnover shows the company's efficiency in utilizing its assets to generate sales. The results showed that the total asset turnover had a positive and insignificant influence on earnings growth. That is, although companies are able to increase the efficiency of the use of assets, this does not always have a positive impact on profit growth.
Implications of this Study
The results of this study provide an overview of the factors that affect the growth of earnings in manufacturing companies on the IDX. Stakeholders, such as investors, creditors, and company management, can use these results to understand important factors that need to be considered in improving the company's financial performance.
Suggestions for Future Research
This research can be developed by expanding the scope of the sample and the research period. In addition, this research can be integrated with qualitative analysis to understand more about other factors that affect earnings growth in manufacturing companies on the IDX.
Conclusion
In conclusion, this study provides an analysis of the factors that affect the growth of earnings in manufacturing companies listed on the IDX. The results show that the current ratio, debt to equity ratio, and total asset turnover have a significant influence on profit growth. The implications of this study are that stakeholders need to consider these factors when improving the company's financial performance.
Limitations of this Study
This study has several limitations. Firstly, the sample size is limited to 32 manufacturing companies listed on the IDX. Secondly, the research period is limited to 2017-2020. Finally, the study only uses secondary data and does not include qualitative analysis.
Future Research Directions
Future research can be developed by expanding the scope of the sample and the research period. In addition, this research can be integrated with qualitative analysis to understand more about other factors that affect earnings growth in manufacturing companies on the IDX.
References
- [1] Indonesia Stock Exchange. (2020). Annual Report 2020.
- [2] World Bank. (2020). Indonesia Overview.
- [3] International Monetary Fund. (2020). Indonesia: Staff Report for the 2020 Article IV Consultation.
Appendices
- [1] List of Manufacturing Companies Listed on the IDX.
- [2] Financial Statements of Manufacturing Companies Listed on the IDX.
- [3] Results of Panel Data Regression Technique.
Table of Contents
- Introduction
- Literature Review
- Methodology
- Results
- Implications of this Study
- Suggestions for Future Research
- Conclusion
- Limitations of this Study
- Future Research Directions
- References
- Appendices
Q&A: Analysis of Factors Affecting Profit Growth in Manufacturing Companies Listed on the Indonesia Stock Exchange
Introduction
In our previous article, we analyzed the factors that affect the growth of earnings in manufacturing companies listed on the Indonesia Stock Exchange (IDX). In this article, we will answer some of the frequently asked questions related to this study.
Q1: What are the main factors that affect the growth of earnings in manufacturing companies listed on the IDX?
A1: The main factors that affect the growth of earnings in manufacturing companies listed on the IDX are the current ratio, debt to equity ratio, and total asset turnover.
Q2: What is the current ratio and how does it affect the growth of earnings?
A2: The current ratio is a measure of a company's ability to fulfill its short-term obligations. The results of this study showed that the current ratio had a negative and insignificant influence on earnings growth. This means that even though a company has a good ability to fulfill its short-term obligations, this does not necessarily have a positive impact on profit growth.
Q3: What is the debt to equity ratio and how does it affect the growth of earnings?
A3: The debt to equity ratio measures the ratio of debt to the company's equity, which shows how much the company uses debt to finance its operations. The results of this study showed that the debt to equity ratio has a negative and significant influence on earnings growth. This means that the higher the debt to equity ratio, the lower the company's profit growth.
Q4: What is the total asset turnover and how does it affect the growth of earnings?
A4: The total asset turnover shows the company's efficiency in utilizing its assets to generate sales. The results of this study showed that the total asset turnover had a positive and insignificant influence on earnings growth. This means that although companies are able to increase the efficiency of the use of assets, this does not always have a positive impact on profit growth.
Q5: What are the implications of this study for stakeholders?
A5: The results of this study provide an overview of the factors that affect the growth of earnings in manufacturing companies on the IDX. Stakeholders, such as investors, creditors, and company management, can use these results to understand important factors that need to be considered in improving the company's financial performance.
Q6: What are the limitations of this study?
A6: This study has several limitations. Firstly, the sample size is limited to 32 manufacturing companies listed on the IDX. Secondly, the research period is limited to 2017-2020. Finally, the study only uses secondary data and does not include qualitative analysis.
Q7: What are the future research directions?
A7: Future research can be developed by expanding the scope of the sample and the research period. In addition, this research can be integrated with qualitative analysis to understand more about other factors that affect earnings growth in manufacturing companies on the IDX.
Q8: What are the practical implications of this study for company management?
A8: The results of this study can be used by company management to identify areas for improvement in their financial performance. For example, if a company has a high debt to equity ratio, management may need to consider reducing debt levels or improving profitability to improve earnings growth.
Q9: What are the implications of this study for investors?
A9: The results of this study can be used by investors to assess the financial performance of manufacturing companies listed on the IDX. Investors can use this information to make informed investment decisions and to identify companies that are likely to experience earnings growth.
Q10: What are the implications of this study for creditors?
A10: The results of this study can be used by creditors to assess the creditworthiness of manufacturing companies listed on the IDX. Creditors can use this information to make informed lending decisions and to identify companies that are likely to experience earnings growth.
Conclusion
In conclusion, this Q&A article provides answers to some of the frequently asked questions related to the analysis of factors affecting profit growth in manufacturing companies listed on the IDX. The results of this study provide an overview of the factors that affect the growth of earnings in manufacturing companies on the IDX and can be used by stakeholders to understand important factors that need to be considered in improving the company's financial performance.