Effect Of Cash Flow Statement Components, Company Size And Gross Profit On Expected Returns With Debt To Equity Ratio As Moderating Variables In Manufacturing Companies Listed On The Indonesia Stock Exchange

Feb 27, 2025 by ADMIN 208 views

**Effect of Cash Flow Statement Components, Company Size, and Gross Profit on Expected Return with Debt to Equity Ratio as Moderating Variables 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 vast array of companies listed on its platform. As an investor, understanding the factors that affect the expected return of these companies is crucial in making informed investment decisions. This study aims to investigate the effect of cash flow statement components, company size, and gross profit on expected return, with debt to equity ratio as a moderating variable, in manufacturing companies listed on the IDX.

Literature Review

Cash flow statement components, such as cash flows from operating, investment, and funding activities, are essential in assessing a company's financial performance. Company size, measured by total assets or sales revenue, can also impact expected return, as larger companies may have more resources to invest in growth initiatives. Gross profit, which represents the difference between revenue and cost of goods sold, is another critical factor that can influence expected return.

Debt to equity ratio, which measures the proportion of debt to equity in a company's capital structure, can also play a moderating role in the relationship between these factors and expected return. A higher debt to equity ratio may indicate a higher risk profile, which can impact investor expectations.

Methodology

This study took a sample of 237 manufacturing companies listed on the IDX during the 2007 to 2012 period. Of these, 32 companies were selected through the Purposive Sampling method, resulting in a total of 192 observations. Multiple linear regression methods were used to analyze the data, with the first hypothesis testing the effect of cash flow statement components, company size, and gross profit on expected return. The second hypothesis tested the moderating effect of debt to equity ratio on this relationship.

Research Findings

The results of this study indicate that all components of cash flow, company size, and gross profit simultaneously affect expected return. However, partially, only cash flow from investment activities, cash flows from funding activities, and gross profit have a significant influence on expected return. This shows that not all components of the cash flow statement have the same impact on the expectations of the yield of investment.

When the debt to equity ratio is tested as a moderating variable, the results obtained do not show a significant effect. This means that the ratio of debt to equity is unable to strengthen or weaken the relationship between these variables and expected return. This finding highlights that the capital structure measured through the debt to equity ratio may not be strong enough to influence investor decisions in the context of the companies under study.

Analysis and Implications

This research provides valuable insight for investors and stakeholders in the capital market. By understanding the component of the cash flow statement that has more impact on the expectations of yield, investors can make smarter investment decisions. Cash flows from investment and funding activities can be an important indicator in assessing the performance of a company and future profit potential.

In addition, the results show that the debt to equity ratio does not function as a moderating variable provides critical information for company management. This shows that the focus on the capital structure does not always provide the expected results in increasing the value of the company in the eyes of investors. Company managers need to consider other aspects that can affect expectations, such as product innovations, marketing strategies, and macroeconomic conditions that can affect the company's operations.

Conclusion

Overall, this research underlines the importance of in-depth analysis of financial statements for better investment decision making in the stock market. With a better understanding of the factors that affect expected return, investors can be better prepared to face the risks in the capital market.

Recommendations

Based on the findings of this study, the following recommendations can be made:

Investors should pay close attention to cash flows from investment and funding activities when assessing the performance of a company.
Company managers should consider other aspects that can affect expectations, such as product innovations, marketing strategies, and macroeconomic conditions.
Further research is needed to investigate the moderating effect of debt to equity ratio on the relationship between cash flow statement components, company size, and gross profit and expected return.

Limitations

This study has several limitations that should be noted. Firstly, the sample size is relatively small, which may limit the generalizability of the findings. Secondly, the study only focuses on manufacturing companies listed on the IDX, which may not be representative of all companies listed on the exchange. Finally, the study only uses a single moderating variable, debt to equity ratio, which may not capture the full range of moderating effects.

Future Research Directions

Future research can build on the findings of this study by investigating the following:

The moderating effect of other variables, such as liquidity ratio or return on equity, on the relationship between cash flow statement components, company size, and gross profit and expected return.
The impact of macroeconomic conditions on the relationship between cash flow statement components, company size, and gross profit and expected return.
The effect of product innovations, marketing strategies, and other company-specific factors on the relationship between cash flow statement components, company size, and gross profit and expected return.

By exploring these research directions, investors and company managers can gain a deeper understanding of the factors that affect expected return and make more informed investment decisions.

Frequently Asked Questions

Q1: What is the main objective of this study?

A1: The main objective of this study is to investigate the effect of cash flow statement components, company size, and gross profit on expected return, with debt to equity ratio as a moderating variable, in manufacturing companies listed on the Indonesia Stock Exchange (IDX).

Q2: What is the significance of this study?

A2: This study provides valuable insight for investors and stakeholders in the capital market. By understanding the component of the cash flow statement that has more impact on the expectations of yield, investors can make smarter investment decisions.

Q3: What are the key findings of this study?

A3: The results of this study indicate that all components of cash flow, company size, and gross profit simultaneously affect expected return. However, partially, only cash flow from investment activities, cash flows from funding activities, and gross profit have a significant influence on expected return.

Q4: What is the role of debt to equity ratio in this study?

A4: The debt to equity ratio is tested as a moderating variable in this study. However, the results obtained do not show a significant effect, indicating that the ratio of debt to equity is unable to strengthen or weaken the relationship between these variables and expected return.

Q5: What are the implications of this study for investors and company managers?

A5: This study highlights the importance of in-depth analysis of financial statements for better investment decision making in the stock market. Investors should pay close attention to cash flows from investment and funding activities when assessing the performance of a company. Company managers should consider other aspects that can affect expectations, such as product innovations, marketing strategies, and macroeconomic conditions.

Q6: What are the limitations of this study?

A6: This study has several limitations that should be noted. Firstly, the sample size is relatively small, which may limit the generalizability of the findings. Secondly, the study only focuses on manufacturing companies listed on the IDX, which may not be representative of all companies listed on the exchange. Finally, the study only uses a single moderating variable, debt to equity ratio, which may not capture the full range of moderating effects.

Q7: What are the future research directions based on this study?

A7: Future research can build on the findings of this study by investigating the following:

The moderating effect of other variables, such as liquidity ratio or return on equity, on the relationship between cash flow statement components, company size, and gross profit and expected return.
The impact of macroeconomic conditions on the relationship between cash flow statement components, company size, and gross profit and expected return.
The effect of product innovations, marketing strategies, and other company-specific factors on the relationship between cash flow statement components, company size, and gross profit and expected return.

Q8: What are the practical implications of this study for investors and company managers?

A8: This study provides practical implications for investors and company managers. Investors should consider the component of the cash flow statement that has more impact on the expectations of yield when making investment decisions. Company managers should consider other aspects that can affect expectations, such as product innovations, marketing strategies, and macroeconomic conditions, when making strategic decisions.

Q9: What are the contributions of this study to the existing literature?

A9: This study contributes to the existing literature by providing a comprehensive analysis of the effect of cash flow statement components, company size, and gross profit on expected return, with debt to equity ratio as a moderating variable, in manufacturing companies listed on the IDX.

Q10: What are the future research opportunities based on this study?

A10: Future research opportunities based on this study include investigating the moderating effect of other variables, such as liquidity ratio or return on equity, on the relationship between cash flow statement components, company size, and gross profit and expected return. Additionally, future research can explore the impact of macroeconomic conditions on the relationship between cash flow statement components, company size, and gross profit and expected return.