The Effect Of Management Decision Making On The Financial Ratios Of The Case Study At PT.Pertamina (Persero) UP II Dumai

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The Effect of Management Decision Making on the Financial Ratios of the Case Study at PT.Pertamina (Persero) UP II Dumai

Abstract

In the world of business, management decision making plays a crucial role in determining the financial health and performance of a company. This study focuses on the impact of management decision making on the financial ratios of PT Pertamina (Persero) UP II Dumai, a state-owned oil processing company located in Dumai, Indonesia. The research aims to understand the effect of management decisions, particularly investment and funding decisions, on the company's financial ratios.

Introduction

PT Pertamina (Persero) UP II Dumai is one of the seven branches of state-owned oil processing companies in Indonesia. As a major player in the oil and gas industry, the company's financial performance is crucial to its survival and growth. Management decision making is a critical aspect of a company's success, and it has a significant impact on the financial ratios of PT Pertamina (Persero) UP II Dumai. This study aims to investigate the effect of management decision making on the financial ratios of the company.

Research Methodology

This study uses a descriptive qualitative approach and is carried out through field methods. The author conducted interviews with parties who have competence in the company to collect data. The data analysis was carried out with qualitative descriptive methods to answer research questions. The results showed that management decisions had a significant influence on the financial ratio of PT Pertamina (Persero) UP II Dumai.

Analysis of Management Decision Making

Management decision making in companies, especially in the context of investment and funding, has major implications for the company's financial health. Appropriate investment decisions can increase the value of assets and long-term profit potential. Conversely, unwise funding decisions can cause high debt loads and affect company liquidity. In the context of PT Pertamina (Persero) UP II Dumai, the decision taken by management in terms of project development and resource management greatly determines the effectiveness of operational and profitability.

For example, if management decides to invest funds in new technology that is more efficient, this can increase productivity and reduce production costs, which in turn will improve the company's financial ratios. Effective management decisions in managing investment and funding directly affected the increase in financial ratios, such as liquidity, solvency, and profitability ratios.

Impact on Financial Ratios

Financial ratios, such as liquidity, solvency, and profitability ratios, are important performance indicators for companies. When management makes a strategic decision and is oriented towards long-term goals, these ratios tend to show positive results. In this study, it was found that effective management decisions in managing investment and funding directly affected the increase in these ratios.

1. Liquidity Ratio

The liquidity ratio shows the company's ability to meet short-term obligations. Management decisions to maintain a balance between current assets and current obligations will ensure the company remains liquid and able to face financial challenges. A high liquidity ratio indicates that the company has sufficient cash and other liquid assets to meet its short-term obligations.

2. Solvency Ratio

The solvency ratio reflects the company's ability to pay all its debts. With a wise decision in managing debt and equity, management can strengthen the company's solvency position, give trust to creditors and investors. A high solvency ratio indicates that the company has sufficient assets to cover its long-term debts.

3. Profitability Ratio

The profitability ratio provides an overview of the company's ability to generate profits. Investment decisions that focus on increasing operational efficiency and product diversification can encourage revenue growth, thereby increasing the ratio of profitability. A high profitability ratio indicates that the company is able to generate sufficient profits to cover its expenses and investments.

Conclusion

From the research conducted, it can be concluded that management decision making at PT Pertamina (Persero) UP II Dumai has a significant influence on the company's financial ratios. With the right strategy in managing investment and funding, management can improve financial performance and ensure the continuity and growth of the company in the future. This study provides important insights for decision makers in the company, and can be a reference for further research in the field of management and finance.

Recommendations

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

  • Management should make strategic decisions that are oriented towards long-term goals.
  • Management should maintain a balance between current assets and current obligations to ensure liquidity.
  • Management should make wise decisions in managing debt and equity to strengthen the company's solvency position.
  • Management should invest in new technology and product diversification to increase operational efficiency and revenue growth.

Limitations

This study has several limitations. Firstly, the study is limited to a single case study, which may not be representative of other companies in the industry. Secondly, the study relies on qualitative data, which may be subjective and biased. Finally, the study does not consider other factors that may affect the financial ratios of PT Pertamina (Persero) UP II Dumai.

Future Research Directions

This study provides a foundation for further research in the field of management and finance. Future research can focus on the following areas:

  • Investigating the impact of management decision making on the financial ratios of other companies in the oil and gas industry.
  • Examining the role of other factors, such as market conditions and economic trends, on the financial ratios of PT Pertamina (Persero) UP II Dumai.
  • Developing a model to predict the financial ratios of PT Pertamina (Persero) UP II Dumai based on management decision making.

References

  • Astuti Yusuf, A. (2006). The Effect of Management Decision Making on the Financial Ratios of PT Pertamina (Persero) UP II Dumai. Unpublished Thesis, University of North Sumatra.
  • Financial Accounting Standards Board (FASB). (2010). Accounting Standards Codification (ASC).
  • International Accounting Standards Board (IASB). (2010). International Financial Reporting Standards (IFRS).

Note: The references provided are a selection of the sources used in the study and are not an exhaustive list.
Q&A: The Effect of Management Decision Making on the Financial Ratios of PT.Pertamina (Persero) UP II Dumai

Q: What is the main focus of this study?

A: The main focus of this study is to investigate the effect of management decision making on the financial ratios of PT.Pertamina (Persero) UP II Dumai, a state-owned oil processing company in Indonesia.

Q: What are the key findings of this study?

A: The study found that management decision making has a significant influence on the financial ratios of PT.Pertamina (Persero) UP II Dumai. Specifically, the study found that effective management decisions in managing investment and funding directly affected the increase in financial ratios, such as liquidity, solvency, and profitability ratios.

Q: What are the implications of this study for management decision making?

A: The study suggests that management should make strategic decisions that are oriented towards long-term goals. Management should also maintain a balance between current assets and current obligations to ensure liquidity, and make wise decisions in managing debt and equity to strengthen the company's solvency position.

Q: What are the limitations of this study?

A: The study has several limitations. Firstly, the study is limited to a single case study, which may not be representative of other companies in the industry. Secondly, the study relies on qualitative data, which may be subjective and biased. Finally, the study does not consider other factors that may affect the financial ratios of PT.Pertamina (Persero) UP II Dumai.

Q: What are the recommendations for future research?

A: The study recommends that future research should investigate the impact of management decision making on the financial ratios of other companies in the oil and gas industry. Future research should also examine the role of other factors, such as market conditions and economic trends, on the financial ratios of PT.Pertamina (Persero) UP II Dumai.

Q: What are the practical implications of this study for PT.Pertamina (Persero) UP II Dumai?

A: The study suggests that PT.Pertamina (Persero) UP II Dumai should implement effective management decision making practices to improve its financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for the oil and gas industry?

A: The study suggests that the oil and gas industry should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for accounting and finance professionals?

A: The study suggests that accounting and finance professionals should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for business students and researchers?

A: The study suggests that business students and researchers should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for policymakers and regulators?

A: The study suggests that policymakers and regulators should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for the Indonesian government?

A: The study suggests that the Indonesian government should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.

Q: What are the implications of this study for the Indonesian economy?

A: The study suggests that the Indonesian economy should prioritize effective management decision making to improve financial performance. This includes making strategic decisions that are oriented towards long-term goals, maintaining a balance between current assets and current obligations, and making wise decisions in managing debt and equity.