Effect Of Receivable Turnover On Company Profitability In The Food & Beverage Industry Listed On The Indonesia Stock Exchange (IDX)

by ADMIN 132 views

Introduction

In the business world, especially in the food and beverage industry sector listed on the Indonesia Stock Exchange (IDX), the turnover of receivables is one important aspect that needs attention. The food and beverage industry is a highly competitive sector, with many companies vying for market share and profitability. As a result, companies in this sector must be efficient in managing their receivables to ensure timely payment and minimize bad debts. This study aims to determine the effect of receivable turnover on company profitability, which is measured through the Return on Assets (ROA) ratio.

Literature Review

The literature on receivable turnover and its impact on company profitability is extensive. Receivable turnover is a key indicator of a company's efficiency in managing its receivables. It measures the number of times a company collects its receivables within a given period. A high receivable turnover ratio indicates that a company is efficient in collecting its receivables, while a low ratio indicates inefficiency. Several studies have investigated the relationship between receivable turnover and company profitability, with mixed results.

For example, a study by Abdullah et al. (2018) found that receivable turnover has a positive impact on company profitability in the manufacturing sector. However, a study by Sulistiyanti et al. (2019) found that receivable turnover has no significant impact on company profitability in the retail sector. These studies highlight the importance of considering the industry and sector-specific factors when investigating the relationship between receivable turnover and company profitability.

Methodology

This study uses a quantitative approach and saturated sampling technique to collect data from 11 companies in the food and beverage industry listed on the IDX. The data used in this study are time series data for the period 2007 to 2011, obtained from the official website of the Indonesia Stock Exchange. The analysis was carried out using a simple linear regression method after meeting some of the assumptions of the classic regression model. Hypothesis testing is carried out using t-test at a significance level of 5% (α = 0.05).

Results

The results of hypothesis testing indicate that the variable turnover of receivables does not significantly affect profitability. The R square value obtained only shows that 1.5% of the variation of the turnover of receivables affects the company's profitability, while the other 98.5% are influenced by other factors outside the turnover of receivables.

Discussion

The results of this study provide an attractive insight about the relationship between the turnover of the accounts receivable and the company's profitability. Although the turnover of receivables can show how quickly the company collects money from receivables, the results found indicate that this indicator does not directly contribute to the profitability measured through ROA.

One of the reasons why receivable turnover has no significant effect can be related to the characteristics of the food and beverage industry itself. In this industry, many companies face challenges in managing their receivables because of different credit policies for various customers. For example, companies that work with large retailers may have different payment requirements compared to small businesses. This difference can cause variations in the turnover of receivables that are not in line with profitability.

In addition, company profitability is also influenced by many other factors, such as production costs, inventory management, and marketing strategies. With a percentage of 98.5% of profitability variations that are influenced by other factors, it is clear that a single focus on the turnover of receivables is not enough to understand the overall financial performance. Therefore, companies need to take a holistic approach by analyzing various financial and operational indicators to increase profitability.

Conclusion

In conclusion, although receivable turnover is an important indicator for assessing efficiency in managing receivables, it is important for companies in the food and beverage industry to consider other factors that can affect profitability. This study reminds us that a deep understanding of market dynamics and comprehensive financial management is the key to achieving success in business.

Recommendations

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

  1. Companies in the food and beverage industry should focus on developing a comprehensive financial management system that takes into account various financial and operational indicators.
  2. Companies should consider the characteristics of their customers and develop credit policies that are tailored to their needs.
  3. Companies should invest in inventory management and production cost control to improve profitability.
  4. Companies should develop effective marketing strategies to increase sales and revenue.

By considering these recommendations, companies in the food and beverage industry can improve their financial performance and achieve success in the highly competitive market.

Limitations

This study has several limitations that should be noted. Firstly, the study only focuses on 11 companies in the food and beverage industry listed on the IDX, which may not be representative of the entire industry. Secondly, the study only uses time series data for the period 2007 to 2011, which may not capture the current market trends and dynamics. Finally, the study only uses a simple linear regression method, which may not capture the complex relationships between the variables.

Future Research Directions

Future research should aim to address the limitations of this study by:

  1. Increasing the sample size to include more companies in the food and beverage industry.
  2. Using more recent data to capture the current market trends and dynamics.
  3. Using more advanced statistical methods, such as panel data analysis or machine learning algorithms, to capture the complex relationships between the variables.

By addressing these limitations and future research directions, researchers can provide more comprehensive and accurate insights into the relationship between receivable turnover and company profitability in the food and beverage industry.

Q: What is receivable turnover and how does it affect company profitability?

A: Receivable turnover is a key indicator of a company's efficiency in managing its receivables. It measures the number of times a company collects its receivables within a given period. A high receivable turnover ratio indicates that a company is efficient in collecting its receivables, while a low ratio indicates inefficiency. The study found that receivable turnover has no significant effect on company profitability in the food and beverage industry listed on the IDX.

Q: Why is receivable turnover important for companies in the food and beverage industry?

A: Receivable turnover is important for companies in the food and beverage industry because it can indicate how efficiently a company is collecting its receivables. This can help companies to identify areas for improvement and optimize their financial performance.

Q: What are some of the challenges that companies in the food and beverage industry face in managing their receivables?

A: Companies in the food and beverage industry face several challenges in managing their receivables, including different credit policies for various customers, variations in payment requirements, and the need to balance cash flow management with customer satisfaction.

Q: What are some of the factors that affect company profitability in the food and beverage industry?

A: Company profitability in the food and beverage industry is affected by several factors, including production costs, inventory management, marketing strategies, and the ability to collect receivables efficiently.

Q: What are some of the recommendations for companies in the food and beverage industry to improve their financial performance?

A: Some of the recommendations for companies in the food and beverage industry to improve their financial performance include:

  1. Developing a comprehensive financial management system that takes into account various financial and operational indicators.
  2. Considering the characteristics of their customers and developing credit policies that are tailored to their needs.
  3. Investing in inventory management and production cost control to improve profitability.
  4. Developing effective marketing strategies to increase sales and revenue.

Q: What are some of the limitations of this study?

A: Some of the limitations of this study include:

  1. The study only focuses on 11 companies in the food and beverage industry listed on the IDX, which may not be representative of the entire industry.
  2. The study only uses time series data for the period 2007 to 2011, which may not capture the current market trends and dynamics.
  3. The study only uses a simple linear regression method, which may not capture the complex relationships between the variables.

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

A: Some of the future research directions for this study include:

  1. Increasing the sample size to include more companies in the food and beverage industry.
  2. Using more recent data to capture the current market trends and dynamics.
  3. Using more advanced statistical methods, such as panel data analysis or machine learning algorithms, to capture the complex relationships between the variables.

Q: What are some of the implications of this study for companies in the food and beverage industry?

A: The study has several implications for companies in the food and beverage industry, including the need to develop a comprehensive financial management system, consider the characteristics of their customers, invest in inventory management and production cost control, and develop effective marketing strategies to increase sales and revenue.

Q: What are some of the recommendations for policymakers and regulators in the food and beverage industry?

A: Some of the recommendations for policymakers and regulators in the food and beverage industry include:

  1. Developing policies and regulations that support the development of a comprehensive financial management system for companies in the food and beverage industry.
  2. Providing training and education programs for companies in the food and beverage industry on financial management and inventory control.
  3. Encouraging companies in the food and beverage industry to invest in research and development to improve their financial performance.

By considering these recommendations, companies in the food and beverage industry can improve their financial performance and achieve success in the highly competitive market.