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(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
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Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Department of Management.
Faculty of Economics and Business.
Universitas Swadaya Gunung Jati Cirebon Corresponding Author: maiyaliza@ugj.
id, mardiyani@ugj.
ABSTRACT
Purpose: This studyAos aim is to do an analysis on the effect of current ratio along with debt to equity ratio on return on assets in the property and real estate sub-sector that is on Indonesia Stock ExchangeAos (IDX) list during 2020-2023, with the moderating variable being company size.
Design/Methodology/Approach: Quantitative research methods were implemented for this study, with a causal associative approach.
Moderated Regression Analysis (MRA) was applied as the technique for data analysis, with Eviews statistical software utilized.
Findings: The findings revealed that current ratio as well as debt to equity ratio impact return on assets This means that an increased liquidity, along with the proportion of debt can reduce the efficiency and profitability of the company.
Company size strengthens the effect by functioning as a moderating variable.
Research limitations/implications: This research only focuses on the real estate and property sub-sector that is on IDXAos list during 2020-2023.
Therefore, this studyAos results may not be generalizable to different sectors or Practical implications: Investors and company management can use this studyAos results as a basis for financial decision-making, particularly in managing liquidity as well as leverage for increased profitability.
Originality/value: New insights are provided by this study into company sizeAos role as the moderating variable for the relationship between leverage, liquidity, along with profitability, especially in the real estate and property Paper type: Research paper Keyword: CR.
DER.
ROA.
Company Size
Received: November 13th
Revised: February 18th
Published: March 31th
INTRODUCTION
The ever-growing era of globalization creates unavoidable competition in the world of business, forcing companies to formulate smart strategies in order to compete at the global level.
Companies must strive to improve performance optimally to avoid financial difficulties, especially amid the decline in economic performance experienced by many companies, including in the sector of properties and real estate.
As of 2022, the property sector in Indonesia only contributed 2.
99% to the national GDP (Gross Domestic Produc.
Compared to Asean countries such as Singapore .
58%).
Malaysia .
48%).
Thailand .
61%).
Indonesia's contribution is still far Thus, the Indonesian property sectorAos contribution to GDP is much smaller than Asean countries (Hilda, 2.
The low contribution is due to several problems caused by the company's profit growth which has The Property sector shows a negative trend over the period 2019 to 2023.
In 2019, it experienced growth of Then, in 2020, its growth began to slow down to 2.
Although in 2021 this sector experienced a recovery with growth of 2.
78%, the growth rate declined again to 1.
72% in 2022 and 1.
43% in 2023 (BPS, 2.
This negative trend is very prominent when compared to the trade sector which has a significant contribution to Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC282 :: IJEBD::
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
the achievement of economic growth, with 12.
96% of GDP (Limanseto, 2.
Referring to BPS data, various sectors in the manufacturing industry have shown positive profitability growth in recent months.
The food and beverage industry, for example, grew by 5.
82%, the basic metal industry sector grew by 12.
The electronic goods, computer metal goods, optical, and electrical equipment sector grew by 7.
The technology sector experienced rapid annual growth of more than 10%, and also the manufacturing sector which reached 17.
(Waluyo, 2.
A companyAos overall performance is strongly affected by effective financial management.
Financial performance reflects a companyAos condition related to its finances that can be analyzed to assess work performance in a certain period (Faisal et al.
, 2.
One measure of financial performance that is relevant to the objectives of a company is the profitability ratio (Fransisca & Widjaja, 2.
According to Setiawan .
n Maryanti, 2.
, profitability is an important indicator to assess the company, which not only measures its capability of generating profits, but also the effectiveness in managing resources.
The indicator used as a measurement of profitability is Return on Asset.
ROA demonstrates the capability of a company in generating income from all assets managed (Azhary et al.
, 2.
Khamisah et al.
, .
added that ROA measures the companyAos capability in making net income from a certain level of assets.
This statement is reinforced by the explanation that low ROA can be caused by high debt usage, which increases interest expense as well as reduces profits (Angela & Nuryani, 2.
Another factor that affects profitability is the company's liquid assets.
Company profitability can be affected by liquidity.
According to Anggraini et al.
, .
Company liquidity shows the ability to meet brief-term obligations, measured through cash flow, current assets, as well as current liabilities.
As explained by Putra .
, the company's liquidity reflects its capability in paying short-term debt, as measured by comparing cash and current assets with current liabilities, with the main indicator being Current Ratio.
Lukito & Hasanudin .
states that CR is a measurement of the company's capability in fulfilling obligations that are short-term with current assets.
As stated by Jenni et al.
CR does not always affect ROA significantly, due to the presence of inventory that is not ready for sale.
Not in line with that.
Prabowo & Sutanto .
stated that CR positively influences ROA, because the capability of the company in paying its short-term debt can result in increased potential profits.
In addition, another factor that affects profitability is funding.
In achieving company goals, sufficient funds are needed, and debt is one of the important elements in funding.
According to Antoniawati & Purwohandoko .
, leverage reflects the ratio of the owner's expenditure to the creditor's expenditure to fund the company's assets, as well as the use of debt to cover fixed costs that can increase potential profits.
In addition, based on the opinion of Hardiyanti et al.
, .
, leverage reflects the capability of a company in guaranteeing debt with the capital it has.
High debt ratios can potentially result in higher returns, however, due to it, companies can also face the risk of loss during a recession.
The measurement of leverage ratio is by using Debt to Equity Ratio in this Chandra et al.
, .
explains that DER shows the ratio between own capital and debt.
Focusing on DER.
Maulita & Tania .
stated that DER shows no effect that is significant on profitability because the company does not have the ability to manage debt.
Not in line with that.
Zendrato et al.
, .
concluded that a significant positive relationship is found between DER with ROA variables, provided that debt is used effectively to fund business operations As part of the analysis of factors affecting profitability, company size reflects a companyAos scale, which is determined through total sales, total assets, market capitalization, and number of workers (Azhari & Nuryatno.
As stated by Zurriah & Prayogi .
, company size can increase liquidity and profitability, since large companies have sufficient assets to facilitate loan income and reduce dependence on external loans, so that company size, as measured by total assets, sales, and profits, has an effect on achieving its goals.
While the research results by Cardilla et al.
, .
concluded, liquidityAos effect on profitability is not moderated by company size, because good liquidity directly determines the capability of a company in managing its obligations that are short-term as well as managing risk, without depending on the size of its operations.
Focusing on leverage.
Setiawan & Suwaidi .
said company size can moderate the positive impact of DER on profitability.
This happens if the firm size is getting bigger, the greater the growth, assets, and sales.
This research contradicts Prabhasyahrani & Khuzaini .
which states that high DER indicates a heavy reliance on debt, which can increase interest expense, reduce net income, and reduce ROA.
This statement is supported by research Prasasti & Takarini .
which shows that an increase in DER can reduce financial performance because high DER reflects dependence on debt, which increases interest expense and financial risk, and negatively impacts ROA.
This study aims to analyze how CR as well as DER affect ROA in real estate and property sub-sector companies that are included on the IDXAos list.
Although this sector has great potential, its contribution to the national GDP is still low, and the GDP growth trend shows a significant decline.
In this study, company size is explored for its role as the moderating variable in the relationship between DER with CR on ROA.
Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC283 :: IJEBD::
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025 This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
II.
METHODS
The research type implemented for this study is causal associative research with the use of quantitative methods, in which the aim is to determine how two or more variables are correlated (Sugiyono, 2.
Data were gathered with research instruments then analyzed quantitatively to test the hypothesis.
In the table below is the indicators used for every variable:
Table 1.
Variable Operational Table Variables Current Ratio (X.
Indicator CR = Total Current Assets (Saputri & Giovanni, 2.
Total Current Debt Debt to Equity Ratio (X.
DER = Return On Assets (Y) ROA = Company Size (Z) Reference Total Debt (Retno et al.
, 2.
Total Equity Net Profit (Muntahanah et al.
, 2.
Total Assets ycIyaycsya = Ln (Total Asset.
(Pradnyaswari & Dana, 2.
The population that will be used in this current study is the Real Estate and Property Sub-Sector Companies that are included on the IDXAos list during 2020-2023 which has 94 companies in total.
Purposive sampling is a method for sampling in accordance to certain considerations which are also referring to specific objectives (Sugiyono, 2.
The sample criteria that will be used are companies in the real estate and property sector that have profits during the observation year and that have IPO no later than 2020.
The sample obtained was 100 observation data.
This studyAos technique for analyzing data is the Moderated Regression Analysis (MRA) analysis technique, assisted by the Eviews Application tool.
As a regression model, the MRA method uses moderator variables to determine whether the moderator variables are present or absent.
Below is the regression equation model for this Y= X1 X2 X1*M X2*M.
Description:
Y : Profitability (ROA) : Constant : Regression Coefficient : Liquidity (CR) : Leverage (DER) M : Company Size A : Standard error i.
RESULTS AND DISCUSSION
Research Test Results This research panel data was analyzed using the Eviews12 statistical tool.
With three model options used, which are Random Effect Model (REM).
Fixed Effect Model (FEM), as well as Common Effect Model (CEM) (Napitupulu, 2.
The three options were tested to compare each other, in order to produce the best research method to use in this study.
Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC284 :: IJEBD::
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
Table 2.
Chow Test Results Source: Data processed with Eviews12 First, a chow test was carried out to make a comparison of the FEM with the CEM, with the cross-section csquare result being 0.
000 (<0.
Thus, it is confirmed that the FEM is better in comparison to the CEM.
Moreover, the Hausman Test was performed to make a comparison of the FEM with the REM, with the cross-section random outcome being 0.
000 (<0.
So, it is certain that the FEM is better in comparison to the REM.
Therefore, according to the test results obtained, for this study the Fixed Effect Model was chosen.
Table 3.
Hausman Test Results Source: Data processed with Eviews12 With Fixed Effect Model (FEM) chosen for this study.
Furthermore, a series of classical assumption tests were performed as a way to make sure that the resulting regression model was valid and reliable.
This test is important to do so that the regression analysis results obtained do not become biased and reliable.
The several classic assumption tests that are commonly used, including.
normality, multicollinearity, heteroscedacity, as well as correlation tests.
The type of data implemented is panel data, which is a combination of the characteristics of time series as well as cross-sectional data.
So, the classic assumption test that is conducted is only multicollinearity along with heteroscedasticity test.
The conduct of multicollinearity test is to assess if the independent variables are correlated.
If multicollinearity exists, the estimated regression parameters can be unstable and difficult to The conduct of heteroscedasticity test is to test the presence of contingent residual variances for all values of the independent variable.
If heteroscedacity occurs, then the estimation of regression parameters can be From the results on the table below, there are no deviations, so it is certain that the data passes the multicollinearity and heterocedacity tests.
Table 4.
Multicollinearity Test Results LOG(.
LOG(F.
LOG(.
DER_FS
LOG(DER)
LOG(FIRM.
LOG(CR_FS)
DER_FS
Source: Data processed with Eviews12 Referring to the correlation coefficient results above, which shows that each relationshipAos value is <0.
Thus, a conclusion is made that the data is free of multicollinearity or the test has been passed (Napitupulu, 2.
Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC285 :: IJEBD::
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025 This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
AMAN - 20
ATAP - 20
BCIP - 21
BSDE - 21
CSIS - 21
CTRA - 21
DADA - 21
DMAS - 21
DUTI - 21
GPRA - 21
HOMI - 21
INDO - 21
JPRT - 23
KIJA - 23
MKPI - 23
MTLA - 23
POLI - 21
PURI - 21
PWON - 21
RDTX - 21
REAL - 21
SMDM - 21
SMRA - 21
URBN - 21
ROA Residuals Figure 1.
Heteroscedasticity Test Results Source: Data processed with Eviews12 As displayed on the residual graph, the residual value is between the values of 50 and -10, which does not cross the limits of 500 and -500, an indication that the residual variance is constant.
Thus, no heterocedacity is present or the Heteroscedacity test is passed (Napitupulu, 2.
Dependent Variable: ROA Table1 .
T Test Results and MRA Test Method: Panel Least Squares Date: 02/19/25 Time: 02:36 Sample: 2020 2023 Periods included: 4 Cross-sections included: 25 Total panel .
observations: 95 Variable Coefficient Std.
Error t-Statistic Prob.
DER
FIRM_SIZE
CR_FS
DER_FS
R-squared Adjusted R-squared of regression Sum CR (X.
resid Log likelihood F-statistic Prob(F-statisti.
Mean dependent var Source:
Data processed Eviews12 var
Akaike info criterion
Schwarz criterion
2437 -1,9274
Hannan-Quinn criter.
Durbin-Watson stat
ROA (Y)
-3,9788
DER (X.
1,8316
3,8132
FIRM SIZE (Z)
Figure 2.
Conceptual Framework Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC286 :: IJEBD::
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
From the panel data regression t test results above, using the FEM on the population of Real Estate and Property sub-sector companies in 2020 - 2023 with the research variables including CR.
DER.
ROA, as well as Company Size.
Then, a form of regression equation is obtained as below:
ROA = 70,700 - 0.
564*CR - 57.
368*DER - 4.
471*FIRM SIZE 0.
039*CR_FS 3.
640(*)DER_FS
Description:
: Current Ratio
DER
: Debt to Equity Ratio
ROA
: Return on Assets Firm Size (FS) : Company Size Dependent Variable: ROA Method: Panel Leastresults Squares Based on the regression shown in the equation ROA = 70.
700 - 0.
564CR - 57.
368DER 02/19/25 Time:
02:36
471FIRM SIZE Date:
039CR_FS
640*DER_FS,
a conclusion can be made that each independent variable shows an impact thatSample:
is significant on the company's ROA.
Current Ratio (CR) shows an impact that is significant Periods included: 4 and negative on ROA with .
-statistic = -1.
9274, p-value of 0.
which is below the 0.
1% Sig.
Then.
Cross-sections included: 25 Debt to Equity RatioTotal (DER) shows an impact that is 95 negative and significant on ROA, with .
-statistic = panel .
9788, p-value of 0.
which is far below the 0.
1% Sig.
On the other hand.
Company Size functions as Std.
Error profitability t-Statistic(CR_FS) Prob.
and between leverage the moderating variable forVariable the relationship Coefficient between liquidity and profitability (DER_FS).
The analysis shows that company size moderates the relationship between CR with C p-value 0.
0000 = 3.
8132, p-value ROA, with .
-statistic = 1.
and between DER and5.
ROA with .
-statistic DER
FIRM_SIZE
Coefficient CR_FS Table 2.
Determination 021510 Results DER_FS R-squared Adjusted R-squared of regression Sum squared resid Log likelihood F-statistic Prob(F-statisti.
Mean dependent var dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter.
Durbin-Watson stat Source: Data processed with Eviews12 The use of determination coefficient is as a measurement of to which extent the model is capable to apply variations in the dependent variable.
In accordance with the coefficient of determination analysis results displayed on Table 2, the resulting R-squared statistical value is 0.
The acquisition of this value is an indication that the independent variables, which are CR.
DER, along with the moderating variable represented by company size can explain the value of ROA worth 25.
8%, whereas the remaining 74.
2% .
- R-Squared valu.
is explained by other variables not included in this model.
Discussion Referring to the studyAos findings that has been tested on the Analysis of CR as well as DER on ROA with Company Size being the Moderating Variable in the Real Estate and Property Company Sub-Sector for 20202023 Period, it was found that Current Ratio (CR) shows an effect that is significant negative on ROA with .
statistic = -1.
9274, p-value of 0.
which is below the 0.
1 Sig.
This is an indication that an increased liquidity as measured by CR is associated with a decrease in ROA, which may be a reflection of companies that have higher liquidity usually have lower asset utilization efficiency in generating profits.
Therefore, the conclusion is that Current Ratio significantly affects Return on Asset in the Real Estate and Property Company Sub-Sector for 2020-2023 Period.
These findings are backed by research of Sutiman & Supatmin, .
with the results of their research.
Current Ratio (CR) partially shows an influence that is significant on ROA at PT Acset Indonusa Tbk for 2013-2023 Period.
Referring to the findings of the study that has been tested on the Analysis of CR as well as DER on ROA with Company Size being the Moderating Variable in the Real Estate and Property Company Sub-Sector for 20202023 Period, it was found that DER also shows an impact that is negative and significant on ROA, with .
-statistic = -3.
9788, p-value 0.
which is far below the 0.
1% significance level.
This is an indication that a rise in debt to equity proportion has the potential to reduce the companyAos profitability.
This implies that companies that use more debt in their capital structure may face higher financial risks, which in turn may reduce their ability to make Analysis of Current Ratio and Debt to Equity Ratio on Return On Assets with Company Size as a Moderating Variable Rahmat Rian Hidayat.
Muhammad Dwika Pramudya.
Maiyaliza*.
Mardiyani* Page iC287 :: IJEBD::
(International Journal of Entrepreneurship and Business Developmen.
Volume 08 Number 02 March 2025
ISSN: 2597-4785 (ONLINE)
ISSN: 2597-4750 (PRINTED)
This work is licensed under a Creative Commons Attribution- ShareAlike 4.
0 International License.
profits from their assets.
Therefore, the conclusion is that Current Ratio significantly affects Return on Asset in the Real Estate and Property Company Sub-Sector for 2020-2023 Period.
These findings are backed by the research of Bere & Winarsa .
with the findings of their research.
Debt to Asset Ratio partially shows an impact that is significant on ROA at PT Wijaya Karya Persero Tbk During 2013-2022.
Referring to the findings of the study that has been tested on the Analysis of CR as well as DER on ROA with Company Size being the Moderating Variable in the Real Estate and Property Company Sub-Sector for 20202023 Period, it was found that the relationship between liquidity with profitability is strengthened by company (CR_FS) demonstrates that company size is able to moderate the relationship between CR with ROA, with .
-statistic = 1.
8316, p-value 0.
This indicates that liquidityAos effect on profitability can be strengthened by company size, so larger companies may possess better capability to manage liquidity in improving their financial This result contradicts the study by Widiasih et al.
, .
with the findings that Company Size is not capable to moderate liquidityAos impact on company profitability.
Referring to the findings of the study that has been tested on the Analysis of CR as well as DER on ROA with Company Size being the Moderating Variable in the Real Estate and Property Company Sub-Sector for 20202023 Period, it was found that the relationship between leverage with profitability is strengthened by company (DER_FS) reveals that company size is able to moderate the relationship between DER with ROA, with .
statistic = 3.
8132, p-value 0.
This is based on the fact that larger companies generally have better access to financial resources and markets, as well as better ability to manage risks.
Large companies usually have a more stable as well as diverse capital structure, allowing them to utilize debt more efficiently without sacrificing profitability performance.
These findings do not align with the research by Subing & Sari .
with the findings that Company Size is not capable of moderating leverageAos effect on company profitability.
IV.
CONCLUSION
Referring to the research findings, several conclusions are drawn as below:
Current Ratio (CR) shows an effect that is significant on ROA, with an increase in liquidity measured through CR associated with a decrease in ROA, which may reflect that companies that have higher liquidity usually have lower asset utilization efficiency in generating profits, this supports the hypothesis.
Debt to Equity Ratio (DER) also affects ROA significantly, with an increase in debt to equity proportion potentially reducing company profitability.
This can be interpreted that companies that use more debt in their capital structure may face higher financial risks, which in turn can reduce their ability to make profits from the assets that they have, supporting the hypothesis.
Company size functions as the moderating variable for the relationship between liquidity with profitability (CR_FS) and between leverage and profitability (DER_FS), indicating that company size can strengthen liquidityAos effect as well as leverageAos effect on profitability, so larger firms may have better capacity to manage liquidity and debt in improving their financial performance, supporting the hypothesis.
REFERENCES