Analysis Of The Company's Financial Performance With Refined Economic Value Added And Financial Value Added And Its Effect On Food And Beverage Company Stock Prices Listed On The Indonesia Stock Exchange

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Analysis of the Company's Financial Performance with Refined Economic Value Added (Reva) and Financial Value Added (FVA) and Its Effect on Food and Beverage Company Stock Prices Listed on the Indonesia Stock Exchange

Introduction

In the world of investment, one of the most crucial indicators used to evaluate a company's financial performance is its economic added value. Two methods that can provide in-depth insight into a company's financial health, especially in the food and beverage sector listed on the Indonesia Stock Exchange (BEI), are Refined Economic Value Added (Reva) and Financial Value Added (FVA). This article aims to analyze the financial performance of these companies and how both have an impact on the stock price traded.

Background

The Indonesia Stock Exchange (BEI) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed, including those in the food and beverage sector. The food and beverage sector is a significant contributor to the Indonesian economy, and its performance can have a substantial impact on the stock market. Therefore, it is essential to analyze the financial performance of companies in this sector to understand their value and potential for growth.

Methodology

This study uses secondary data from the Indonesia Stock Exchange website (www.idx.co.id) which includes 13 of 15 companies in the food and beverage sector during the 2010 to 2012 period. The analysis method used is a panel data regression model with a significance level of 5%. The dependent variable is the stock price, while the independent variables are Reva and FVA.

Results

The results of this study showed that:

  1. There is no significant difference between the average Reva and the average FVA.
  2. Simultaneously, Reva and FVA have a positive and significant influence on the stock price of food and beverage companies listed on the Indonesia Stock Exchange.

However, when it was tested partially, only Reva showed a significant positive effect on stock prices, while FVA did not have a significant impact.

In-Depth Understanding of Reva and FVA

Refined Economic Value Added (Reva)

Reva is a metric that calculates how much value added by the company after calculating capital costs. In this analysis, Reva helps investors to assess whether the company really creates value for its shareholders. If the Reva value is positive, it means that the company not only covers the cost of capital but also produces a surplus that can be forwarded to shareholders.

Financial Value Added (FVA)

On the other hand, FVA is more focused on measuring the company's financial performance based on the cash flow produced. FVA is calculated from the cash flow after the tax is reduced by capital costs, which provides an overview of the company's profitability in the context of returning investment.

Effect on Stock Prices

From the research results, it appears that the stock price of food and beverage companies on the IDX is more sensitive to Reva than FVA. This shows that investors pay more attention to the potential growth of long-term values than just the current cash flow. It also reflects that investors tend to choose companies that not only generate profits, but are also able to create more value in a long period of time.

Conclusion

The results of this study provide a better understanding of how the company's financial performance, measured through Reva and FVA, contributes to the value of the company in the stock market. For investors, a greater focus on Reva can be a good strategy in choosing investment in the food and beverage sector. In addition, these findings also underline the importance of in-depth understanding of the measurement of financial performance that not only relies on net profit, but also considers other factors that can affect the company's long-term value.

Recommendations

Based on the findings of this study, the following recommendations can be made:

  1. Investors should focus on companies with high Reva values, as they are more likely to create long-term value for their shareholders.
  2. Companies should prioritize creating value for their shareholders by focusing on Reva and FVA.
  3. The Indonesia Stock Exchange should consider incorporating Reva and FVA into its evaluation criteria for listed companies.

Limitations

This study has several limitations, including:

  1. The use of secondary data, which may not be comprehensive or up-to-date.
  2. The limited number of companies included in the study.
  3. The use of a panel data regression model, which may not capture all the complexities of the relationship between Reva, FVA, and stock prices.

Future Research Directions

Future research should aim to:

  1. Expand the sample size to include more companies in the food and beverage sector.
  2. Use primary data to collect more comprehensive and up-to-date information.
  3. Explore other factors that may affect the relationship between Reva, FVA, and stock prices.

By addressing these limitations and expanding the scope of the study, future research can provide a more comprehensive understanding of the relationship between Reva, FVA, and stock prices in the food and beverage sector.
Q&A: Analysis of the Company's Financial Performance with Refined Economic Value Added (Reva) and Financial Value Added (FVA) and Its Effect on Food and Beverage Company Stock Prices Listed on the Indonesia Stock Exchange

Q: What is Refined Economic Value Added (Reva) and Financial Value Added (FVA)?

A: Reva and FVA are two methods used to measure a company's financial performance. Reva calculates how much value added by the company after calculating capital costs, while FVA measures the company's financial performance based on the cash flow produced.

Q: Why are Reva and FVA important in evaluating a company's financial performance?

A: Reva and FVA are important because they provide a more comprehensive understanding of a company's financial health, beyond just its net profit. They help investors assess whether the company creates value for its shareholders and is able to generate long-term value.

Q: What are the key findings of this study?

A: The study found that:

  1. There is no significant difference between the average Reva and the average FVA.
  2. Simultaneously, Reva and FVA have a positive and significant influence on the stock price of food and beverage companies listed on the Indonesia Stock Exchange.
  3. However, when it was tested partially, only Reva showed a significant positive effect on stock prices, while FVA did not have a significant impact.

Q: What does this mean for investors?

A: This means that investors should focus on companies with high Reva values, as they are more likely to create long-term value for their shareholders. Additionally, investors should consider other factors that can affect a company's long-term value, beyond just its current cash flow.

Q: What are the implications of this study for companies in the food and beverage sector?

A: The study suggests that companies in the food and beverage sector should prioritize creating value for their shareholders by focusing on Reva and FVA. This can be achieved by generating long-term value and creating a surplus that can be forwarded to shareholders.

Q: What are the limitations of this study?

A: The study has several limitations, including:

  1. The use of secondary data, which may not be comprehensive or up-to-date.
  2. The limited number of companies included in the study.
  3. The use of a panel data regression model, which may not capture all the complexities of the relationship between Reva, FVA, and stock prices.

Q: What are the future research directions for this study?

A: Future research should aim to:

  1. Expand the sample size to include more companies in the food and beverage sector.
  2. Use primary data to collect more comprehensive and up-to-date information.
  3. Explore other factors that may affect the relationship between Reva, FVA, and stock prices.

Q: What are the practical implications of this study for the Indonesia Stock Exchange?

A: The study suggests that the Indonesia Stock Exchange should consider incorporating Reva and FVA into its evaluation criteria for listed companies. This can help investors make more informed decisions and provide a more comprehensive understanding of a company's financial health.

Q: What are the potential applications of this study in other industries?

A: The study's findings can be applied to other industries beyond the food and beverage sector. Companies in other sectors can use Reva and FVA to evaluate their financial performance and create long-term value for their shareholders.

Q: What are the potential risks and challenges associated with using Reva and FVA?

A: The study highlights the potential risks and challenges associated with using Reva and FVA, including:

  1. The complexity of calculating Reva and FVA.
  2. The potential for manipulation of Reva and FVA values.
  3. The need for a comprehensive understanding of the relationship between Reva, FVA, and stock prices.

Q: What are the potential benefits of using Reva and FVA?

A: The study highlights the potential benefits of using Reva and FVA, including:

  1. A more comprehensive understanding of a company's financial health.
  2. The ability to evaluate a company's long-term value.
  3. The potential to create long-term value for shareholders.