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Evidence of Financial Ratio Impact on Non-Financial Firm Profitability

Accounting Analysis Journal · Vol. 12 No. 2 (2023) · pp. 102–111

DOI
10.15294/aaj.v12i2.70466
ISSN
2502-6216, 2252-6765
Published
2023-11-20
Publisher
Universitas Negeri Semarang
Language
eng

Abstract

Purpose: This study is conducted to determine the factors that affect profitability in Indonesia listed companies by using financial ratios. Four independent variables (liquidity, intangible assets, working capital, and company leverage) were empirically tested to determine their relationships with profitability. Method: The data set covers 100 companies during the period of 2019 – 2021, and a random selection method was used in order to achieve credibility and fairness as much as possible and hypotheses were tested using a pooled ordinary least square regression model Findings: These findings show that firm size, working capital, and firm efficiency have a positive and significant relationship with profitability. In addition, these findings show a negative and significant relationship between liquidity and EPS and debt to equity ratio with ROA and EPS, but show a negative insignificant relationship with ROA. This means that the company suffers from low profitability due to the inefficient use of current assets. Interestingly, leverage shows mixed results, debt to equity ratio shows a negative and significant relationship with ROA and EPS, while leverage ratio shows a positive but insignificant relationship with ROA and EPS. In other words, profitability will increase only up to certain point. Novelty: This study differs than previous studies in number of aspects: First, this study examines the impact of four independent factors and two control variables that some of them are new in the context of research in Indonesia such as intangible assets. Second, previous studies focus on financial industry such as banks, however this study focuses on non-financial industry. Keywords: Financial Ratios; Profitability; Nonfinancial Companies; Indonesia

Collaboration network of the authors

14 authors · 22 co-authorship links

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  • Universitas Gadjah Mada
  • Affiliation unknown
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
Show as table
Co-authorOrganisationJoint articles
Ni Kadek Diah PurnamayantiAffiliation unknown1
Muhammad G A PutraAffiliation unknown1
Ahyaudin AhyaudinAffiliation unknown1
Alamsyah HarahapAffiliation unknown1
Syafryadin SyafryadinAffiliation unknown1
Annisa AstridAffiliation unknown1
Wuri WuryandaniAffiliation unknown1
Anwar SenenAffiliation unknown1
Faturrohman FaturrohmanAffiliation unknown1
Christantie EffendyUniversitas Gadjah Mada1
Catur KurniawanAffiliation unknown1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.unnes.ac.id/sju/index.php/aaj/oai, first harvested 5 Nov 2026, last seen 8 Nov 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">Evidence of Financial Ratio Impact on Non-Financial Firm Profitability</dc:title>
	<dc:creator>Syafruddin, Muchamad</dc:creator>
	<dc:creator>Weinanto, Clarientina Jane</dc:creator>
	<dc:creator>Haryani, Haryani</dc:creator>
	<dc:description xml:lang="en-US">Purpose: This study is conducted to determine the factors that affect profitability in Indonesia listed companies by using financial ratios. Four independent variables (liquidity, intangible assets, working capital, and company leverage) were empirically tested to determine their relationships with profitability.
Method: The data set covers 100 companies during the period of 2019 – 2021, and a&amp;nbsp;random selection method was used in order to achieve credibility and fairness as much&amp;nbsp;as possible and hypotheses were tested using a pooled ordinary least square regression model
Findings: These findings show that firm size, working capital, and firm efficiency have a positive and significant relationship with profitability. In addition, these findings show a negative and significant relationship between liquidity and EPS and debt to equity ratio with ROA and EPS, but show a negative insignificant relationship with ROA.&amp;nbsp;This means that the company suffers from low profitability due to the inefficient use of&amp;nbsp;current assets. Interestingly, leverage shows mixed results, debt to equity ratio shows a&amp;nbsp;negative and significant relationship with ROA and EPS, while leverage ratio shows a&amp;nbsp;positive but insignificant relationship with ROA and EPS. In other words, profitability will increase only up to certain point.
Novelty: This study differs than previous studies in number of aspects: First, this study&amp;nbsp;examines the impact of four independent factors and two control variables that some&amp;nbsp;of them are new in the context of research in Indonesia such as intangible assets. Second, previous studies focus on financial industry such as banks, however this study focuses on non-financial industry.
Keywords:&amp;nbsp;Financial Ratios; Profitability; Nonfinancial Companies; Indonesia</dc:description>
	<dc:publisher xml:lang="en-US">Universitas Negeri Semarang</dc:publisher>
	<dc:date>2023-11-20</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
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	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.unnes.ac.id/sju/aaj/article/view/70466</dc:identifier>
	<dc:identifier>10.15294/aaj.v12i2.70466</dc:identifier>
	<dc:source xml:lang="en-US">Accounting Analysis Journal; Vol 12 No 2 (2023); 102-111</dc:source>
	<dc:source>2502-6216</dc:source>
	<dc:source>2252-6765</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.unnes.ac.id/sju/aaj/article/view/70466/25735</dc:relation>
	<dc:rights xml:lang="en-US">Copyright (c) 2023 Accounting Analysis Journal</dc:rights>
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