ANALYZING THE EFFECT OF LIQUIDITY AND SOLVENCY RATIOS ON PROFITABILITY AT PT ASTRA INTERNATIONAL TBK (2015–2023)

Nurul  Maghfirah Sultan; Romansyah Sahabuddin; Nurman

doi:10.31328/bmb.v5i2.355

Nurul Maghfirah Sultan Fakultas Ekonomi dan Bisnis, Universitas Negeri Makassar
Romansyah Sahabuddin Fakultas Ekonomi dan Bisnis, Universitas Negeri Makassar
Nurman Fakultas Ekonomi dan Bisnis, Universitas Negeri Makassar

DOI: https://doi.org/10.31328/bmb.v5i2.355

Keywords: Liquidity, Solvency, Profitability

Abstract

This study investigates the impact of liquidity, as represented by the Current Ratio (CR), and solvency, as measured by the Debt to Asset Ratio (DAR), on profitability, proxied by Return on Assets (ROA), in the case of PT Astra International Tbk during the 2015–2023 period. Employing a quantitative approach with a descriptive method, this research analyzes secondary data sourced from the company’s quarterly financial reports. Multiple linear regression analysis is used to examine both the individual and combined effects of liquidity and solvency on profitability.

The findings reveal that CR has a negative and statistically significant effect on ROA, indicating that higher liquidity may correspond to lower profitability. This suggests that excessive current assets could reflect underutilized resources that are not optimally contributing to income generation. Similarly, DAR also demonstrates a negative and significant relationship with ROA, implying that higher reliance on debt may reduce profitability due to the burden of interest and other financial obligations. Collectively, liquidity and solvency are shown to significantly influence profitability.

These results highlight the importance of maintaining a strategic balance between current assets and debt to achieve sustainable financial performance. This study is limited to a specific period and a single company within the automotive and diversified industry, which may affect the generalizability of the conclusions. Future research is encouraged to explore additional financial indicators or conduct comparative studies across sectors to enhance the breadth and applicability of the findings.

References

Annual Report PT Astra International, Tbk. 2015-2023

Amelia, RW, & Sunarsi, D. (2020, March 25). The Effect of Return on Asset and Return on Equity on Debt to Equity Ratio at PT. Kalbe Farma, Tbk. Ad-Deenar: Journal of Islamic Economics and Business, IV, 105-114.

Amin, AN (n.d.). THE EFFECT OF DEBT TO ASSET RATIO (DAR) ON STOCK PRICES IN FOOT AND BEVERAGE COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE.

Arum, M., & Afrisah, E. (2022). THE EFFECT OF CURRENT RATIO AND DEBT TO ASSET RATIO ON RETURN ON ASSET (Empirical Study of Manufacturing Companies in the Food and Beverage Sub-Sector on the IDX in 2015-2019). Edunomika, 06, 1-14.

Atmaja, LS (2018). Theory & Practice of Financial Management. Yogyakarta: Andi.

Brigham, EF, & Houston, JF (2018). Fundamentals of Financial Management. (MM, Edited.) Jakarta: Salemba Empat.

Darmawan. (2020). Basics of Understanding Ratios and Financial Reports. Yogyakarta: UNY Press.

Dendawijaya, L. (2010). Banking Management. Jakarta: Ghalia Indonesia.

Fahmi, I. (2013). Financial Report Analysis. Bandung: Alfabeta.

Friedlob, G. T., & Plewa, Jr., F. J. (1991). Financial and Business Statements. Hauppauge: Barron's Educational Series.

Gill, J., & Chatton, M. (2003). Understanding Financial Reports. Jakarta: PPM Publisher.

Gitman, L. J., & Zutter, C. J. (2012). Principles of Managerial Finance, 13th Edition. Boston: Prentice Hall.

Harahap, SS (2016). Critical Analysis of Financial Reports. Jakarta: PT. Raja Grafindo Persada.

Helfert, EA (1993). Techniques of Financial Analysis. Jakarta: Erlangga.

Henny, & Susanto, L. (2019). Factors Affecting Profitability in Manufacturing Companies. Multiparadigma Accounting Journal, I, 390-398.

Hery. (2014). Accounting and Management Control. Jakarta: Kencana.

Hidayat, WW (2018). Basics of Financial Report Analysis. (F. Fabri, Editor.) Ponorogo: Uwais Inspirasi Indonesia.

Iswari., Wulandari, W., & Shaputri, R. N. (2023). The mediating role of dividend payout ratio on the effect of cash ratio and return on equity to price-earnings ratio (A study at food and beverage companies listed on the Indonesia Stock Exchange). Proceeding International Conference on Accounting and Finance, 217–229.https://conference.upnvj.ac.id/index.php/icaf/article/view/580

Iswari, H. R., Salim, U., & Djazuli, A. (2019). Value-added creation in financial perspective by collaboration of intellectual capital and corporate policy. Jurnal Aplikasi Manajemen, 17(4), 767–777.https://jurnaljam.ub.ac.id/index.php/jam/article/view/1417

Kasmir. (2017). Financial Report Analysis, 1st Edition, 10th Printing. Jakarta: Raja Grafindo Persada.

Kasmir. (2018). Financial Report Analysis. Jakarta: PT. Raja Grafindo Persada.

Kasmir. (2019). Financial Statement Analysis (Revised Edition, 12th Printing). Jakarta: Rajawali Pers.

Kosasih, E., & Soewedo, H. (2012). Financial Management Accounting of Shipping Companies: A practical approach in the field of shipping business 2nd Edition, 2nd Printing. Jakarta: Rajawali Pers.

Martono, & Harjito, A. (2010). Financial Management. Yogyakarta: Ekonisia.

Munawir. (2014). Financial Report Analysis. Yogyakarta: Liberty.

Putri, VA, Nurcholisah, K., & Nurhayati. (2019). The Effect of Liquidity and Solvency on Profitability (Empirical Study on Coal Mining Sector Companies Listed on the Indonesia Stock Exchange for the Period 2011-2015). SPeSIA Accounting Proceedings (Unisba Academic Community Research Seminar), V, 109-114.

Riyanto, B. (2001). Basics of Corporate Spending. Yogyakarta: BPFE.

Sari, PB, & Dwilita, H. (2019). Financial Management: An Introduction (Student Edition). (F. Ario, & MD Nasution, Editors.) Medan.

Sartono, R. (2022). Financial Management: Theory and Application 4th Edition. Yogyakarta: BPFE.

Sawir, A. (2015). Financial Performance Analysis and Financial Planning. Jakarta: Gramedia Pustaka Utama.

Seto, AA, Yulianti, ML, Nurchayati, Kusumastuti, R., Astuti, N., Febrianto, HG, . . . Fauzan, R. (2023). Financial Statement Analysis. (R. Ristiyana, Editor.) Padang: PT. Global Executive Technology.

Sugiono, A., & Untung, E. (2016). Basic Practical Guide to Financial Report Analysis. Jakarta: PT. Grasindo.

Sugiyono. (2018). Business Research Methods Quantitative, Qualitative, Combination, and R&D Approaches. Bandung: Alfabeta.

Van Horne, JC, & Wachowicz, Jr., JM (2014). Principles of Financial Management (Fundamentals of Financial Management) 13th Edition Book 1. Jakarta: Salemba Empat.

Van Horne, JC, & Wachowicz, Jr., JM (2014). Principles of Financial Management (Fundamentals of Financial Management) 13th Edition Book 2. Jakarta: Salemba Empat.

Weston, JF, & Copeland, TE (1992). Financial Management Volume 2. Jakarta: Binarupa Script