Financial Ratios and Their Significance

Oct 13, 2025 by talynt.org 149 views

The Influence of Financial Performance on the Value of Manufacturing Companies in the Food and Beverage Sub-Sector Registered on the Indonesia Stock Exchange for the 2012-2018 Period

In the business world, company financial performance is often an important indicator that determines the company's value. This study aims to analyze the effect of financial ratios on company value in the food and beverage manufacturing sector listed on the Indonesia Stock Exchange. The focus of this study includes financial ratios such as the Current Ratio (CR), Debt to Equity Ratio (DER), Return on Assets (ROA), and Total Asset Turnover (Tattoo), and its impact on the Company's Price To Book Value (PBV) during the 2012 period until 2018.

Understanding the Importance of Financial Performance

Financial performance is one aspect that is highly considered by investors and other stakeholders. Financial ratios such as CR, DER, ROA, and Tattoos provide a clear picture of the efficiency and financial health of a company. These ratios are essential in evaluating a company's ability to generate profits, manage its assets, and maintain a healthy financial position.

Financial Ratios and Their Significance

Current Ratio (CR)

The Current Ratio (CR) is a financial ratio that shows the company's ability to fulfill its short-term obligations. A high CR indicates that the company has sufficient liquidity to meet its short-term debts, while a low CR can indicate problems in cash flows. A CR that is too high can also show excessive liquidity, which may not be a desirable situation for a company.

Debt to Equity Ratio (DER)

The Debt to Equity Ratio (DER) is a financial ratio that indicates how much the proportion of debt compared to equity. A high DER can indicate a greater financial risk, as the company may be over-leveraged and vulnerable to financial distress. In this study, it was proven that a high DER has a negative impact on PBV, indicating that investors should be cautious when investing in companies with high debt levels.

Return on Asset (ROA)

The Return on Asset (ROA) is a financial ratio that measures how effective the company uses its assets to generate profits. A high ROA indicates that the company is using its assets efficiently and effectively, which can contribute positively to PBV. In this study, it was found that ROA has a positive and significant influence on PBV, indicating that investors should focus on companies with high ROA when making investment decisions.

Total Asset Turnover (Tattoo)

The Total Asset Turnover (Tattoo) is a financial ratio that shows how well the company uses its assets to generate income. Although in this study, it did not show a significant effect, tattoos remain an important indicator of efficiency. A high tattoo can indicate that the company is using its assets effectively to generate income, which can contribute positively to PBV.

Implications for Investors

Based on the results of the study, investors who focus on the food and beverage sector need to pay attention to ROA as the main indicator in making investment decisions. A high level of ROA can be a positive signal about the potential growth of company value. However, attention must also be given to high DER, because it can increase risk.

Conclusion

Overall, this research shows the importance of understanding financial performance in evaluating company value, especially in very competitive sectors such as food and drinks. Further research can be done to explore other factors that also affect the value of the company in this sector, including macroeconomic conditions and specific industrial factors. By understanding the relationship between financial performance and company value, investors and business people can make better and more informed decisions.

Recommendations for Future Research

Exploring other factors that affect company value: Future research can explore other factors that affect company value, including macroeconomic conditions and specific industrial factors.
Analyzing the impact of financial performance on company value in other sectors: Future research can analyze the impact of financial performance on company value in other sectors, such as technology or healthcare.
Developing a more comprehensive model of company value: Future research can develop a more comprehensive model of company value that takes into account multiple factors, including financial performance, macroeconomic conditions, and specific industrial factors.

Limitations of the Study

Limited sample size: The study only analyzed 13 companies listed on the Indonesia Stock Exchange, which may not be representative of the entire food and beverage sector.
Limited time period: The study only analyzed data from 2012 to 2018, which may not capture the impact of more recent economic and industrial trends.
Limited scope: The study only focused on financial performance as a determinant of company value, and did not explore other factors that may also affect company value.

Future Directions for Research

Developing a more comprehensive model of company value: Future research can develop a more comprehensive model of company value that takes into account multiple factors, including financial performance, macroeconomic conditions, and specific industrial factors.
Analyzing the impact of financial performance on company value in other sectors: Future research can analyze the impact of financial performance on company value in other sectors, such as technology or healthcare.
Exploring the impact of other factors on company value: Future research can explore the impact of other factors on company value, including macroeconomic conditions and specific industrial factors.
Frequently Asked Questions (FAQs) about the Influence of Financial Performance on the Value of Manufacturing Companies in the Food and Beverage Sub-Sector Registered on the Indonesia Stock Exchange for the 2012-2018 Period

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of financial ratios on company value in the food and beverage manufacturing sector listed on the Indonesia Stock Exchange.

Q: What are the financial ratios analyzed in this study?

A: The financial ratios analyzed in this study include the Current Ratio (CR), Debt to Equity Ratio (DER), Return on Assets (ROA), and Total Asset Turnover (Tattoo).

Q: What is the significance of the Current Ratio (CR)?

A: The Current Ratio (CR) is a financial ratio that shows the company's ability to fulfill its short-term obligations. A high CR indicates that the company has sufficient liquidity to meet its short-term debts, while a low CR can indicate problems in cash flows.

Q: What is the significance of the Debt to Equity Ratio (DER)?

A: The Debt to Equity Ratio (DER) is a financial ratio that indicates how much the proportion of debt compared to equity. A high DER can indicate a greater financial risk, as the company may be over-leveraged and vulnerable to financial distress.

Q: What is the significance of the Return on Asset (ROA)?

A: The Return on Asset (ROA) is a financial ratio that measures how effective the company uses its assets to generate profits. A high ROA indicates that the company is using its assets efficiently and effectively, which can contribute positively to PBV.

Q: What is the significance of the Total Asset Turnover (Tattoo)?

A: The Total Asset Turnover (Tattoo) is a financial ratio that shows how well the company uses its assets to generate income. Although in this study, it did not show a significant effect, tattoos remain an important indicator of efficiency.

Q: What are the implications of this study for investors?

A: Based on the results of the study, investors who focus on the food and beverage sector need to pay attention to ROA as the main indicator in making investment decisions. A high level of ROA can be a positive signal about the potential growth of company value. However, attention must also be given to high DER, because it can increase risk.

Q: What are the limitations of this study?

A: The study only analyzed 13 companies listed on the Indonesia Stock Exchange, which may not be representative of the entire food and beverage sector. The study also only analyzed data from 2012 to 2018, which may not capture the impact of more recent economic and industrial trends.

Q: What are the future directions for research?

A: Future research can develop a more comprehensive model of company value that takes into account multiple factors, including financial performance, macroeconomic conditions, and specific industrial factors. Future research can also analyze the impact of financial performance on company value in other sectors, such as technology or healthcare.

Q: What are the practical implications of this study?

A: The practical implications of this study are that investors and business people can make better and more informed decisions by understanding the relationship between financial performance and company value. This study can also help investors and business people to identify potential risks and opportunities in the food and beverage sector.

Q: What are the contributions of this study?

A: The contributions of this study are that it provides a comprehensive analysis of the effect of financial ratios on company value in the food and beverage manufacturing sector listed on the Indonesia Stock Exchange. This study also provides insights into the importance of financial performance in evaluating company value, especially in very competitive sectors such as food and drinks.