The Role of Financial Ratio Analysis in Predicting the Health of Textile Companies and Footwear Listed on the Jakarta Stock Exchange

Oct 13, 2025 by talynt.org 90 views

The Role of Financial Ratio Analysis in Predicting the Health of Textile Companies and Footwear Listed on the Jakarta Stock Exchange

Introduction

In the world of finance, making informed investment decisions is crucial for achieving success. One of the key tools used by investors to assess the health and potential of a company is fundamental analysis. This approach involves examining a company's financial statements and other fundamental data to determine its intrinsic value and potential for future growth. In this study, we focus on the role of financial ratio analysis in predicting the health of textile companies and footwear listed on the Jakarta Stock Exchange.

The Importance of Fundamental Analysis

Fundamental analysis plays a vital role in assessing investment in stocks because it enables investors to identify variables that affect future stock price movements. By analyzing a company's fundamental information, investors can determine whether the shares are worth buying or not. This study aims to investigate the influence of fundamental factors on the stock price of textile companies and footwear listed on the Jakarta Stock Exchange.

Methodology

This study uses time series data from 51 textile companies and footwear listed on the Jakarta Stock Exchange during the period 2004 to 2006. The independent variables used in this study include:

Return on Equity (ROE): This ratio shows the company's ability to generate profits from the capital invested by shareholders.
Debt to Equity Ratio (DER): This ratio demonstrates the level of leverage or dependence on the company's debt.
Net Book Value (NBV): This value shows the net value of the company's assets, which reflects the intrinsic value of the company.
Dividend Payout Ratio (DPR): This ratio shows the proportion of net profit distributed to shareholders as dividends.
Dividend Growth (GTH): This ratio demonstrates dividend growth paid to shareholders.
Expected Profit Level (KSS): This ratio demonstrates investors' expectations of company profitability in the future.

The company's stock price (CLP) is a dependent variable in this study. The analysis method used is multiple linear regression to determine the effect of each variable individually and simultaneously on stock prices.

Results

The results showed that the Net Book Value (NBV) had a dominant influence on the stock price of textile companies and footwear listed on the Jakarta Stock Exchange. That is, NBV is a better benchmark in assessing the company's stock prices compared to other fundamental variables. In addition, the six independent variables simultaneously have an influence on stock prices.

Implications

This research has several important implications for investors and stakeholders:

NBV as an important indicator: NBV becomes a key indicator in assessing the health and intrinsic value of textile companies and footwear. Investors can use NBV as one of the main parameters in determining investment decisions.
The role of other fundamental variables: Although NBV has a dominant influence, other fundamental variables such as ROE, DER, DPR, GTH, and KSS also play an important role in shaping stock prices.
Multi-Factor Analysis: To get a more comprehensive picture, investors need to consider all fundamental variables simultaneously.

Limitations

This research also has several limitations, including:

Limited research period: Research data only includes the 2004-2006 period. Analysis in a broader period is needed to test the validity of the research results.
Limited number of samples: Research only involves 51 textile companies and footwear.
External Factors: This research does not consider the influence of external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.

Conclusion

Despite having several limitations, this research provides valuable insight for investors in understanding the role of fundamental analysis and the importance of variables such as NBV in assessing health and investment values in textile companies and footwear listed on the Jakarta Stock Exchange. By considering the results of this study, investors can make more informed decisions and achieve better investment outcomes.

Recommendations

Based on the findings of this study, we recommend that investors and stakeholders consider the following:

Use NBV as a key indicator: Investors should use NBV as one of the main parameters in determining investment decisions.
Consider multiple fundamental variables: Investors should consider all fundamental variables simultaneously to get a more comprehensive picture.
Monitor external factors: Investors should monitor external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.

By following these recommendations, investors can make more informed decisions and achieve better investment outcomes.
Frequently Asked Questions (FAQs) about Financial Ratio Analysis in Predicting the Health of Textile Companies and Footwear Listed on the Jakarta Stock Exchange

Q: What is financial ratio analysis, and how does it help in predicting the health of textile companies and footwear listed on the Jakarta Stock Exchange?

A: Financial ratio analysis is a method of analyzing a company's financial statements to determine its financial health and potential for future growth. By examining various financial ratios, investors can identify trends and patterns that can help them make informed investment decisions. In the context of this study, financial ratio analysis is used to predict the health of textile companies and footwear listed on the Jakarta Stock Exchange.

Q: What are the key financial ratios used in this study?

A: The key financial ratios used in this study include:

Return on Equity (ROE)
Debt to Equity Ratio (DER)
Net Book Value (NBV)
Dividend Payout Ratio (DPR)
Dividend Growth (GTH)
Expected Profit Level (KSS)

Q: What is the significance of Net Book Value (NBV) in this study?

A: The results of this study show that Net Book Value (NBV) has a dominant influence on the stock price of textile companies and footwear listed on the Jakarta Stock Exchange. This means that NBV is a better benchmark in assessing the company's stock prices compared to other fundamental variables.

Q: How can investors use the results of this study to make informed investment decisions?

A: Investors can use the results of this study to make informed investment decisions by considering the following:

Use NBV as a key indicator in assessing the health and intrinsic value of textile companies and footwear.
Consider multiple fundamental variables simultaneously to get a more comprehensive picture.
Monitor external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.

Q: What are the limitations of this study?

A: This study has several limitations, including:

Limited research period: Research data only includes the 2004-2006 period.
Limited number of samples: Research only involves 51 textile companies and footwear.
External Factors: This research does not consider the influence of external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.

Q: How can investors overcome the limitations of this study?

A: Investors can overcome the limitations of this study by:

Conducting further research in a broader period to test the validity of the research results.
Increasing the number of samples to include more textile companies and footwear.
Considering the influence of external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.

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

A: The implications of this study for investors and stakeholders are:

NBV becomes a key indicator in assessing the health and intrinsic value of textile companies and footwear.
Other fundamental variables such as ROE, DER, DPR, GTH, and KSS also play an important role in shaping stock prices.
Investors need to consider all fundamental variables simultaneously to get a more comprehensive picture.

Q: What are the recommendations for investors and stakeholders based on the findings of this study?

A: Based on the findings of this study, we recommend that investors and stakeholders consider the following:

Use NBV as a key indicator in assessing the health and intrinsic value of textile companies and footwear.
Consider multiple fundamental variables simultaneously to get a more comprehensive picture.
Monitor external factors such as macroeconomic conditions and government regulations that can affect the company's performance and share price.