The Influence Of Current Ratio, Debt To Equity Ratio, Total Assets Turnover, Return On Equity, And Earnings Per Share On Stock Prices In Consumer Goods Companies Listed On The Indonesia Stock Exchange

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The Influence of Current Ratio, Debt to Equity Ratio, Total Assets Turnover, Return on Equity, and Earnings Per Share on Stock Prices in Consumer Goods Companies Listed on the Indonesia Stock Exchange

Introduction

In the world of investment, investors often find themselves searching for the factors that affect a company's stock prices. The stock market is a complex and dynamic environment, where various financial ratios and indicators play a crucial role in determining the performance of a company. This study aims to analyze the effect of the current ratio (CR), debt to equity ratio (DER), total assets turnover (TATTOO), return on equity (ROE), and earnings per share (EPS) on the stock prices of consumer goods companies listed on the Indonesia Stock Exchange (IDX) during the period 2008 to 2010.

Research Methodology

In this study, the sampling method used was purposive sampling. The dependent variable analyzed is the stock price, while the independent variable consists of CR, DER, TATTOO, ROE, and EPS. To analyze data, multiple linear regression is used, where the regression model is first tested by conducting a classic assumption test. The data used in this study were collected from the company's financial statements published on the official website of the IDX, namely www.idx.co.id, as well as company financial data obtained from the Indonesian Capital Market Directory (ICMD).

Research Findings

The results of this study showed that partially, only EPS had a significant influence on the stock price of consumer goods. This indicates that the profits generated by the company, which are reflected in EPS, are the main factors that attract the attention of investors. Meanwhile, CR, DER, and TATTOO do not show significant effects individually on stock prices.

However, in simultaneous testing, it was found that CR, DER, TATTOO, ROE, and EPS together had a significant influence on stock prices. This shows that although some financial ratios may not have an individual effect, the combination of all of these ratios provides a comprehensive picture of company performance that can influence investment decisions.

Additional Analysis and Explanation

From the results of this study, we can draw some important conclusions for investors. First, although EPS is the dominant variable that affects stock prices, investors must also consider other ratios to get a clearer picture of the company's financial health. For example, the current ratio that shows the company's ability to pay short-term obligations, and debt to equity ratio that reflects the proportion of debt to equity can provide additional information about financial risks that may be faced by the company.

Second, Total Assets Turnover (TATTOO) can show company efficiency in using assets to generate income. While Return on Equity (ROE) provides an indication of how well the company generates profits from each unit of equity owned. Both are important indicators in fundamental analysis, although it does not significantly affect on stock prices in this study.

Conclusion

Overall, this research highlights the importance of understanding financial ratios in investment decision making. For investors, the combination of financial ratio analysis and monitoring of financial statements regularly is an important strategy to maximize the potential of profits and minimize risk in stock investment.

Recommendations

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

  1. Investors should consider multiple financial ratios when making investment decisions, rather than relying on a single ratio.
  2. The current ratio and debt to equity ratio should be considered as important indicators of financial health, in addition to EPS.
  3. Total Assets Turnover (TATTOO) and Return on Equity (ROE) should be used as important indicators of company efficiency and profitability, respectively.
  4. Investors should regularly monitor financial statements and financial ratios to make informed investment decisions.

Limitations

This study has several limitations that should be noted. First, the study only analyzed the effect of five financial ratios on stock prices, and did not consider other factors that may affect stock prices. Second, the study only analyzed the data of consumer goods companies listed on the IDX, and did not consider other industries or markets. Third, the study only analyzed the data for the period 2008 to 2010, and did not consider other time periods.

Future Research Directions

Based on the findings of this study, several future research directions are suggested:

  1. Analyze the effect of other financial ratios on stock prices, such as the price-to-earnings ratio and the dividend yield.
  2. Analyze the effect of non-financial ratios on stock prices, such as the company's reputation and brand value.
  3. Analyze the effect of other industries or markets on stock prices.
  4. Analyze the effect of other time periods on stock prices.

Conclusion

In conclusion, this study highlights the importance of understanding financial ratios in investment decision making. The combination of financial ratio analysis and monitoring of financial statements regularly is an important strategy to maximize the potential of profits and minimize risk in stock investment.
Frequently Asked Questions (FAQs) about the Influence of Current Ratio, Debt to Equity Ratio, Total Assets Turnover, Return on Equity, and Earnings Per Share on Stock Prices in Consumer Goods Companies Listed on the Indonesia Stock Exchange

Q: What is the current ratio and how does it affect stock prices?

A: The current ratio is a financial ratio that measures a company's ability to pay short-term obligations. It is calculated by dividing the company's current assets by its current liabilities. A high current ratio indicates that a company has a strong ability to pay its short-term obligations, which can positively affect stock prices.

Q: What is the debt to equity ratio and how does it affect stock prices?

A: The debt to equity ratio is a financial ratio that measures a company's level of indebtedness. It is calculated by dividing the company's total debt by its total equity. A high debt to equity ratio indicates that a company has a high level of debt, which can negatively affect stock prices.

Q: What is the total assets turnover and how does it affect stock prices?

A: The total assets turnover is a financial ratio that measures a company's efficiency in using its assets to generate income. It is calculated by dividing the company's sales by its total assets. A high total assets turnover indicates that a company is using its assets efficiently, which can positively affect stock prices.

Q: What is the return on equity and how does it affect stock prices?

A: The return on equity is a financial ratio that measures a company's profitability. It is calculated by dividing the company's net income by its total equity. A high return on equity indicates that a company is generating high profits, which can positively affect stock prices.

Q: What is the earnings per share and how does it affect stock prices?

A: The earnings per share is a financial ratio that measures a company's profitability on a per-share basis. It is calculated by dividing the company's net income by the number of outstanding shares. A high earnings per share indicates that a company is generating high profits, which can positively affect stock prices.

Q: How do financial ratios affect stock prices?

A: Financial ratios can affect stock prices by providing investors with information about a company's financial health, profitability, and efficiency. By analyzing financial ratios, investors can make informed decisions about whether to buy or sell a company's stock.

Q: What are the limitations of this study?

A: This study has several limitations, including:

  • The study only analyzed the effect of five financial ratios on stock prices, and did not consider other factors that may affect stock prices.
  • The study only analyzed the data of consumer goods companies listed on the IDX, and did not consider other industries or markets.
  • The study only analyzed the data for the period 2008 to 2010, and did not consider other time periods.

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

A: The findings of this study have several implications for investors, including:

  • Investors should consider multiple financial ratios when making investment decisions, rather than relying on a single ratio.
  • The current ratio and debt to equity ratio should be considered as important indicators of financial health, in addition to EPS.
  • Total Assets Turnover (TATTOO) and Return on Equity (ROE) should be used as important indicators of company efficiency and profitability, respectively.
  • Investors should regularly monitor financial statements and financial ratios to make informed investment decisions.

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

A: Several future research directions are suggested, including:

  • Analyzing the effect of other financial ratios on stock prices, such as the price-to-earnings ratio and the dividend yield.
  • Analyzing the effect of non-financial ratios on stock prices, such as the company's reputation and brand value.
  • Analyzing the effect of other industries or markets on stock prices.
  • Analyzing the effect of other time periods on stock prices.