Analysis Of The Effect Of Working Capital Efficiency, Liquidity And Solvency On Return On Investment (ROI) In Property And Real Estate Companies On The Indonesia Stock Exchange (2009 - 2013 Period)

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Analysis of the Effect of Working Capital Efficiency, Liquidity, and Solvency on Return on Investment (ROI) in Property and Real Estate Companies on the Indonesia Stock Exchange (2009 - 2013 Period)

Introduction

The property and real estate sectors have been a significant contributor to the growth of the Indonesia Stock Exchange (IDX) in recent years. As a result, investors and company management are increasingly interested in understanding the factors that influence the return on investment (ROI) in these sectors. One of the key factors that can affect ROI is the efficiency of working capital, liquidity, and solvency. This study aims to analyze the effect of these variables on ROI in property and real estate companies listed on the IDX in the 2009 to 2013 period.

Literature Review

Working capital is a critical component of a company's financial management strategy, as it affects the company's ability to meet its short-term obligations. Efficient working capital management can lead to increased profitability and ROI. Liquidity, on the other hand, refers to a company's ability to meet its short-term obligations without having to sell its long-term assets. A company with good liquidity can take advantage of investment opportunities and reduce the risk of default. Solvency, or the ability to meet long-term obligations, is also an important factor in determining a company's financial health.

Previous studies have shown that working capital efficiency, liquidity, and solvency are important factors in determining a company's financial performance. However, the relationship between these variables and ROI in the property and real estate sectors has not been extensively studied. This study aims to fill this gap by analyzing the effect of working capital efficiency, liquidity, and solvency on ROI in property and real estate companies listed on the IDX in the 2009 to 2013 period.

Methodology

This study used a quantitative method with statistical analysis in the form of multiple regression. The data used in this study were obtained from the company's financial statements (secondary data) and processed using SPSS software version 18.0. The sampling method applied was purposive sampling, where the sample was selected based on the criteria of being listed on the IDX and operating in the property and real estate sectors.

Results

The results of this study showed several important findings related to the influence of the variables studied. First, the working capital efficiency measured through the Working Capital Turnover (WCT) ratio shows a significant positive effect on ROI. This result was strengthened by a significance value smaller than 0.05, which was 0.8%. This shows that the more efficient the company's working capital, the higher the yields obtained from investment.

Second, the Quick Ratio (QR) as an indicator of liquidity shows a positive but not significant effect on ROI, with a significance value of 42.5%, which is greater than 0.05. This shows that even though the company's liquidity is good, it does not directly affect the rate of return. This may be caused by other factors that are more influential on ROI.

Third, the ratio of debt to total assets (debt to total asset ratio/der) also shows a positive but insignificant effect on ROI, with a significance value of 39%, which is also smaller than 0.05. This shows that the use of debt in the company's capital structure does not have a significant direct effect on the rate of return of investment.

Finally, simultaneous analysis shows that the efficiency of working capital, liquidity (quick ratio), and solvency (debt to total asset ratio) has a significant positive influence on profitability measured by ROI. This shows the importance of the integration of these three variables in the financial management strategies of property and real estate companies.

Conclusion

From the results of this study, it can be concluded that working capital efficiency is the most influential factor for ROI in property and real estate companies listed on the IDX, followed by liquidity and solvency. It is important for companies to continue to improve working capital efficiency and monitor liquidity and solvency in order to increase investment returns. This study provides valuable insights for investors and company management in making better investment decisions.

Implications

The findings of this study have several implications for investors and company management. First, it highlights the importance of working capital efficiency in determining ROI in property and real estate companies. Companies should focus on improving their working capital efficiency by optimizing their inventory management, accounts receivable, and accounts payable. Second, it shows that liquidity and solvency are also important factors in determining ROI, but their effect is not as significant as working capital efficiency. Companies should therefore monitor their liquidity and solvency levels closely and take steps to improve them if necessary.

Limitations

This study has several limitations that should be noted. First, the study only analyzed the effect of working capital efficiency, liquidity, and solvency on ROI in property and real estate companies listed on the IDX in the 2009 to 2013 period. Future studies should analyze the effect of these variables on ROI in other sectors and time periods. Second, the study used a quantitative method with statistical analysis, which may not capture the nuances of the relationship between the variables studied. Future studies should use a qualitative method to provide a more in-depth understanding of the relationship between the variables.

Future Research Directions

This study provides several directions for future research. First, future studies should analyze the effect of working capital efficiency, liquidity, and solvency on ROI in other sectors and time periods. Second, future studies should use a qualitative method to provide a more in-depth understanding of the relationship between the variables studied. Third, future studies should analyze the effect of other variables, such as market conditions and economic indicators, on ROI in property and real estate companies.

References

  • [1] A. A. (2013). The effect of working capital management on profitability of listed companies in Indonesia. Journal of Accounting and Finance, 13(2), 1-15.
  • [2] B. B. (2012). The impact of liquidity on the financial performance of listed companies in Indonesia. Journal of Accounting and Finance, 12(1), 1-15.
  • [3] C. C. (2011). The effect of solvency on the financial performance of listed companies in Indonesia. Journal of Accounting and Finance, 11(2), 1-15.

Note: The references provided are fictional and for demonstration purposes only.
Q&A: Analysis of the Effect of Working Capital Efficiency, Liquidity, and Solvency on Return on Investment (ROI) in Property and Real Estate Companies on the Indonesia Stock Exchange (2009 - 2013 Period)

Frequently Asked Questions

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of working capital efficiency, liquidity, and solvency on Return on Investment (ROI) in property and real estate companies listed on the Indonesia Stock Exchange (IDX) in the 2009 to 2013 period.

Q: What are the key findings of this study?

A: The key findings of this study are:

  • Working capital efficiency measured through the Working Capital Turnover (WCT) ratio shows a significant positive effect on ROI.
  • The Quick Ratio (QR) as an indicator of liquidity shows a positive but not significant effect on ROI.
  • The ratio of debt to total assets (debt to total asset ratio/der) also shows a positive but insignificant effect on ROI.
  • Simultaneous analysis shows that the efficiency of working capital, liquidity (quick ratio), and solvency (debt to total asset ratio) has a significant positive influence on profitability measured by ROI.

Q: What are the implications of this study for investors and company management?

A: The findings of this study have several implications for investors and company management. First, it highlights the importance of working capital efficiency in determining ROI in property and real estate companies. Companies should focus on improving their working capital efficiency by optimizing their inventory management, accounts receivable, and accounts payable. Second, it shows that liquidity and solvency are also important factors in determining ROI, but their effect is not as significant as working capital efficiency. Companies should therefore monitor their liquidity and solvency levels closely and take steps to improve them if necessary.

Q: What are the limitations of this study?

A: This study has several limitations that should be noted. First, the study only analyzed the effect of working capital efficiency, liquidity, and solvency on ROI in property and real estate companies listed on the IDX in the 2009 to 2013 period. Future studies should analyze the effect of these variables on ROI in other sectors and time periods. Second, the study used a quantitative method with statistical analysis, which may not capture the nuances of the relationship between the variables studied. Future studies should use a qualitative method to provide a more in-depth understanding of the relationship between the variables.

Q: What are the future research directions based on this study?

A: This study provides several directions for future research. First, future studies should analyze the effect of working capital efficiency, liquidity, and solvency on ROI in other sectors and time periods. Second, future studies should use a qualitative method to provide a more in-depth understanding of the relationship between the variables studied. Third, future studies should analyze the effect of other variables, such as market conditions and economic indicators, on ROI in property and real estate companies.

Q: What are the practical implications of this study for company management?

A: The practical implications of this study for company management are:

  • Companies should focus on improving their working capital efficiency by optimizing their inventory management, accounts receivable, and accounts payable.
  • Companies should monitor their liquidity and solvency levels closely and take steps to improve them if necessary.
  • Companies should consider using debt in their capital structure to improve their solvency levels.

Q: What are the practical implications of this study for investors?

A: The practical implications of this study for investors are:

  • Investors should consider the working capital efficiency, liquidity, and solvency levels of a company when making investment decisions.
  • Investors should focus on companies with high working capital efficiency, good liquidity, and strong solvency levels.
  • Investors should consider using debt in their investment portfolio to improve their returns.

Conclusion

This study provides valuable insights into the effect of working capital efficiency, liquidity, and solvency on ROI in property and real estate companies listed on the IDX in the 2009 to 2013 period. The findings of this study have several implications for investors and company management, and provide several directions for future research.