Effect Of Sales Growth, Inventory Turn Over, Working Capital, And Capital Structure On Profitability In Manufacturing Companies Listed On The IDX 2015 - 2018
Effect of Sales Growth, Inventory Turn Over, Working Capital, and Capital Structure on Profitability in Manufacturing Companies Listed on the IDX (2015-2018)
Introduction
The manufacturing industry plays a vital role in the economic growth of a country, and companies listed on the Indonesia Stock Exchange (IDX) are no exception. In recent years, the manufacturing sector has experienced significant growth, driven by increasing demand for goods and services. However, this growth has also led to increased competition, making it essential for companies to optimize their financial performance to remain competitive. One of the key indicators of a company's financial performance is its profitability, which is influenced by various factors, including sales growth, inventory turnover, working capital, and capital structure.
Background
The manufacturing industry in Indonesia has experienced significant growth in recent years, driven by increasing demand for goods and services. However, this growth has also led to increased competition, making it essential for companies to optimize their financial performance to remain competitive. The IDX has listed numerous manufacturing companies, and these companies have varying levels of financial performance. Understanding the factors that influence profitability is crucial for companies to make informed decisions regarding their financial and operational policies.
Research Objectives
The primary objective of this study is to analyze the effect of sales growth, inventory turnover, working capital, and capital structure on profitability in manufacturing companies listed on the IDX during 2015 to 2018. The study aims to provide insights into the factors that influence profitability and to identify the most significant factors that contribute to a company's financial performance.
Methodology
The study used a population of 153 registered companies listed on the IDX. Through purposive sampling techniques, researchers chose 60 companies that meet the criteria for further analysis. The data used in this study are secondary, and data collection is carried out through documentation study methods. To analyze data, multiple linear regression techniques are used.
Results
The results of the study showed that partially, sales growth, working capital, and capital structure did not have a significant influence on profitability. However, what's interesting is that inventory turn over shows positive and significant effects on company profitability.
Additional Analysis and Explanation
Sales Growth and Profitability
Sales growth is a measure to assess the increase in sales from time to time. Although sales growth is important, this study shows that not all sales growth is accompanied by an increase in profitability. This can happen because the company may face a higher cost to maintain the growth rate, for example through marketing, promotion, or increasing production capacity that is not balanced with efficiency.
Inventory Turn Over
Inventory Turn Over measures how fast the company can sell the stock of goods in a certain period. The finding that inventory turn over has a positive and significant effect on profitability shows that companies capable of selling their inventory quickly tend to have better profit margins. This can be caused by reducing outdated inventory risk and lower storage costs.
Working Capital
Working capital is the difference between current assets and current liabilities. Although adequate working capital is important for the company's operational continuity, the results of this study indicate that not all increased working capital is followed by an increase in profitability. This may be related to the use of inefficient capital or investment that does not produce the expected return.
Capital Structure
The capital structure refers to the proportion of debt and equity used by the company to finance its assets. Although a balanced capital structure is considered ideal, in the context of this study, it was found that changes in the capital structure were not significant to profitability. This may be caused by variations in the cost of debt or equity that indirectly impacts financial performance in the short term.
Conclusion
Overall, this research provides an understanding that not all financial performance indicators contribute uniformly to company profitability. While Inventory Turn Over shows a clear positive connection with profitability, other factors such as sales growth, working capital, and capital structure require a deeper and more contextual approach to understand their effects. These results can be a reference for managers and investors in making better decisions regarding the company's financial and operational policies in the future.
Implications of the Study
The findings of this study have several implications for managers and investors. Firstly, the study highlights the importance of inventory turnover in contributing to a company's profitability. Companies that are able to sell their inventory quickly tend to have better profit margins. Secondly, the study suggests that not all sales growth is accompanied by an increase in profitability. Companies need to ensure that their sales growth is balanced with efficiency and that they are not facing higher costs to maintain the growth rate. Finally, the study indicates that working capital and capital structure are not significant factors in contributing to a company's profitability. Companies need to focus on optimizing their inventory turnover and sales growth to improve their financial performance.
Limitations of the Study
The study has several limitations. Firstly, the study only analyzed the data of 60 companies listed on the IDX. A larger sample size would provide more robust results. Secondly, the study only analyzed the data for a specific period (2015-2018). A longer time period would provide more insights into the factors that influence profitability. Finally, the study only analyzed the data from a single country (Indonesia). A comparative study with other countries would provide more insights into the factors that influence profitability.
Future Research Directions
The study provides several avenues for future research. Firstly, the study highlights the importance of inventory turnover in contributing to a company's profitability. Future research could investigate the factors that influence inventory turnover and how companies can improve their inventory turnover. Secondly, the study suggests that not all sales growth is accompanied by an increase in profitability. Future research could investigate the factors that influence sales growth and how companies can balance their sales growth with efficiency. Finally, the study indicates that working capital and capital structure are not significant factors in contributing to a company's profitability. Future research could investigate the factors that influence working capital and capital structure and how companies can optimize their working capital and capital structure to improve their financial performance.
Conclusion
In conclusion, this study provides an understanding of the factors that influence profitability in manufacturing companies listed on the IDX. The study highlights the importance of inventory turnover in contributing to a company's profitability and suggests that not all sales growth is accompanied by an increase in profitability. The study also indicates that working capital and capital structure are not significant factors in contributing to a company's profitability. The findings of this study have several implications for managers and investors and provide several avenues for future research.
Frequently Asked Questions (FAQs) on the Effect of Sales Growth, Inventory Turn Over, Working Capital, and Capital Structure on Profitability in Manufacturing Companies Listed on the IDX (2015-2018)
Q: What is the main objective of this study?
A: The primary objective of this study is to analyze the effect of sales growth, inventory turnover, working capital, and capital structure on profitability in manufacturing companies listed on the IDX during 2015 to 2018.
Q: What is the population of this study?
A: The population of this study is 153 registered companies listed on the IDX.
Q: What is the sample size of this study?
A: The sample size of this study is 60 companies that meet the criteria for further analysis.
Q: What is the data collection method used in this study?
A: The data collection method used in this study is documentation study methods.
Q: What is the data analysis technique used in this study?
A: The data analysis technique used in this study is multiple linear regression techniques.
Q: What are the findings of this study?
A: The findings of this study show that partially, sales growth, working capital, and capital structure did not have a significant influence on profitability. However, what's interesting is that inventory turn over shows positive and significant effects on company profitability.
Q: What is the implication of this study for managers and investors?
A: The findings of this study have several implications for managers and investors. Firstly, the study highlights the importance of inventory turnover in contributing to a company's profitability. Companies that are able to sell their inventory quickly tend to have better profit margins. Secondly, the study suggests that not all sales growth is accompanied by an increase in profitability. Companies need to ensure that their sales growth is balanced with efficiency and that they are not facing higher costs to maintain the growth rate.
Q: What are the limitations of this study?
A: The study has several limitations. Firstly, the study only analyzed the data of 60 companies listed on the IDX. A larger sample size would provide more robust results. Secondly, the study only analyzed the data for a specific period (2015-2018). A longer time period would provide more insights into the factors that influence profitability. Finally, the study only analyzed the data from a single country (Indonesia). A comparative study with other countries would provide more insights into the factors that influence profitability.
Q: What are the future research directions based on this study?
A: The study provides several avenues for future research. Firstly, the study highlights the importance of inventory turnover in contributing to a company's profitability. Future research could investigate the factors that influence inventory turnover and how companies can improve their inventory turnover. Secondly, the study suggests that not all sales growth is accompanied by an increase in profitability. Future research could investigate the factors that influence sales growth and how companies can balance their sales growth with efficiency. Finally, the study indicates that working capital and capital structure are not significant factors in contributing to a company's profitability. Future research could investigate the factors that influence working capital and capital structure and how companies can optimize their working capital and capital structure to improve their financial performance.
Q: What are the practical implications of this study for companies?
A: The findings of this study have several practical implications for companies. Firstly, companies need to focus on optimizing their inventory turnover to improve their profitability. Secondly, companies need to ensure that their sales growth is balanced with efficiency and that they are not facing higher costs to maintain the growth rate. Finally, companies need to optimize their working capital and capital structure to improve their financial performance.
Q: What are the theoretical implications of this study?
A: The findings of this study have several theoretical implications. Firstly, the study highlights the importance of inventory turnover in contributing to a company's profitability. This challenges the traditional view that sales growth is the primary driver of profitability. Secondly, the study suggests that not all sales growth is accompanied by an increase in profitability. This challenges the traditional view that sales growth is always a good thing. Finally, the study indicates that working capital and capital structure are not significant factors in contributing to a company's profitability. This challenges the traditional view that working capital and capital structure are critical factors in determining a company's financial performance.