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Analysis of the Effect of Liquidity, Leverage, and Profitability on the Financial Performance of Companies in the Indonesian Capital Market

Year: 2024

Type: article

Abstract: This study examines the influence of leverage, liquidity, and profitability on the financial performance of companies listed on the Indonesian Capital Market. A quantitative approach was utilized, involving 150 companies, with data measured using a Likert scale (1–5) and analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS 3). The findings reveal that leverage and profitability significantly and positively impact financial performance, with profitability demonstrating the strongest effect. Liquidity also positively influences financial performance, albeit to a lesser extent. Collectively, the three variables explain 62% of the variance in financial performance, highlighting their interdependence and critical role in driving firm success. The study provides valuable insights for corporate managers and policymakers in emerging markets, emphasizing the importance of strategic financial planning to ensure sustainable growth.

Source: West Science Business and Management

DOI: 10.58812/wsbm.v2i04.1499

Authors: Basuki Toto Rahmanto, KMT Lasmiatun, Nursyam Ar, Ramli Toalib, Syamsinar Syamsinar

Institutions: Universitas Muhammadiyah Semarang, Universitas Indonesia Timur

Language: English

Topic: Financial Analysis and Corporate Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: diamond

OpenAlex ID: W4406300722

FWCI: 3.057

Cites:

Cited by: 3

Related to: 10