Analysis The Influence of Working Capital to Total Assets
94
Analysis The Influence of Working Capital to Total Assets (WCTA), Debt to Equity Ratio (DER), Total Assets Turnover (TAT), and Net Profit Margin (NPM) toward Return on Equity (ROE) (Case study of Top 10 Manufacturing Companies based on Forbes Magazine Indonesia in 2015 that listed in Indonesia Stock Exchange period 2008-2013) By Hafsa Hermala Sari ID No. 014201100165 A Skripsi presented to the Faculty of Business President University in partial fulfillment of the requirements for Bachelor Degree in Economics Major in Management 2015
Analysis The Influence of Working Capital to Total Assets
(WCTA), Debt to Equity Ratio (DER), Total Assets
Turnover (TAT), and Net Profit Margin (NPM) toward
Return on Equity (ROE)
(Case study of Top 10 Manufacturing Companies based on Forbes
Magazine
Indonesia in 2015 that listed in Indonesia Stock Exchange period
2008-2013)
By
in partial fulfillment of the requirements for
Bachelor Degree in Economics Major in Management
2015
i
APPROVAL SHEET
The Panel of Examiners declares that the Skripsi entitled “Analysis
The
Influence of Working Capital to Total Assets (WCTA), Debt to
Equity Ratio (DER), Total Assets Turnover (TAT), and Net
Profit
Margin (NPM) toward Return on Equity (ROE) (Case study of Top
10 Manufacturing Companies based on Forbes Magazine Indonesia
in 2015 that listed in Indonesia Stock Exchange period
2008-2013)”
that was submitted by Hafsa Hermala Sari was assessed and
approved
to have passed the Oral Examinations on 6 th April, 2015.
Filda Rahmiati, BBA, MBA
Chair – Panel of Examiners
Examiner I
This Skripsi entitled “Analysis The Influence of Working Capital
to
Total Assets (WCTA), Debt to Equity Ratio (DER), Total Assets
Turnover (TAT), and Net Profit Margin (NPM) toward Return on
Equity (ROE) (Case study of Top 10 Manufacturing Companies
based on Forbes Magazine Indonesia in 2015 that listed in
Indonesia
Stock Exchange period 2008-2013)” prepared and submitted by
Hafsa
Hermala Sari in partial fulfillment of the requirements for the
degree of
Bachelor of Economics with a concentration of Banking and Finance
in
the Faculty of Business has been reviewed and found to have
satisfied
the requirements for a Skripsi fit to be examined. I therefore
recommend
this Skripsi for Oral Defense.
Cikarang, March 25 th 2015
Acknowledge By, Recommended By,
Head, Management Study Program Advisor
iii
ORIGINALITY
I declare that is Skripsi, entitled Analysis The Influence of
Working
Capital to Total Assets (WCTA), Debt to Equity Ratio (DER),
Total
Assets Turnover (TAT), and Net Profit Margin (NPM) toward
Return on Equity (ROE) (Case study of Top 10 Manufacturing
Companies based on Forbes Magazine Indonesia in 2015 that
listed
in Indonesia Stock Exchange period 2008-2013)” is, to the best of
my
knowledge and belief, an original piece of work that has not
been
submitted, either in whole or in part, to another university to
obtain a
degree.
iv
ABSTRACT
This research is about to analyze the influence of working capital
to total
assets, debt to equity ratio, total assets turnover, and net profit
margin
toward return on equity. The problem stated in this research is
about
there is a difference between theory and the results of previous
studies.
The objective of this study is to analyze the partial and
simultaneous
significant influence of WCTA, DER, TAT, and NPM toward ROE.
The
methodology used in this research is quantitative research method
using
secondary data. The sampling method used is purposive sampling,
with
criteria that the manufacturing company and financial analysis data
are
from annual report each company. The analysis of this research is
using
multiple regression analysis. With significant level of 0.05, the
result of
multiple regression shows that partially, WCTA have a negative and
not
significant influence, DER have a negative significant influence,
TAT
and NPM have a positive significant influence toward ROE.
While
simultaneously all of the independent variable are significantly
influence
the ROE. The coefficient of determinant in this research is
26.1%.
Keywords: WCTA, DER, TAT, NPM, ROE
v
ACKNOWLEDGEMENT
Bismillahirrohmanirrohim
Today I finish my skripsi. Finally I have done one step of my life
levels. I have been
faces so many experience during this skripsi and it became the
lessons to me. After
all I would have never reached the point of finshing this skripsi
without help and
support of others. Because of that, I would like to kindly thank
them.
First of all, I would like to say thank you very much to Allah SWT
for always
guided me in every step I take during this skripsi. I always pray
to give me a straight
way so I would not loss when doing my skripsi and finally I reached
this step. Ya
Allah ya Rabb, Alhamdulillah. Thank you so much for the whole
things you made
for me. All praises to Allah SWT.
My Ibu, Yositha Sefta Maria and My Bapak, Fauzi Fuazt. I really
really thanks to
them because of them I can passed my hard time phase. Thank you,
Ibu and Bapak
for all the prays that goes to me in every time, it always
meaningful for me and I
would need your pray in every time. Thank you for the unstoppable
support for me
even when I am not in the good mood you always cheering me up and
you always
sharing your love and smile for me. Bu, Pak, there is nothing
greatest and beautiful
besides your love and smile for me. I love you both and I never
stop to loving you
both. I am a woman now but “daddy’s little girl” will always in
me.
My Mama Nurtifa Akma and My Papa, Hery. Thank you Mam and Pap for
always
pray for me, even we are separated in hundred miles, your pray is
always guided me.
Thank you for your kindness and Thank you for always sharing your
love for me. I
feel it, Mam, Pap. I always feel your love indeed. I love
you.
vi
My oldest brother, Awaludin Laksana Juangga. Hi bro, finally I made
it. Thank
you for your support to me and thank you for always visiting me
during the skripsi.
For my young and youngest brother, Satria Maulana Putrandia and
Saldan Bayu
Yuska. Thank you my little hero for the support and love and all of
the things. I love
you.
My all lecturers at President University. Thank you for your
dedication in education,
your words of wisdom, and indirect life lesson that you have been
giving to me.
Especially Mr. Iman Heru Wijayanto, MBA as my advisor, and Mr.
Vinsensius
Jajat K., SE., MM., MBA., thank you for always give me some advices
and the
information until I finish my skripsi.
And now, my loyal best partner, Abdil Muttaqin. I would like to say
thanks for you
to always being there for me in my sadness, happy, got stressed,
well you always
being there to cheering me up. It’s been one of the greatest times
of my life since I
know you and be close to you. Thank you for being an owner half of
my heart.
My best girlfriends Laras Hening Basuki, Putri Citra Arnidewi,
Nabila Alzena,
Ajeng Dwi Sarastri, Maylinda Jharina Thaha, and Mustika Haryati.
Thank you
for always support me during this skripsi and always want to know
how far I do the
skripsi so I can finish the skripsi faster. Thank you girl, you
always be the part of my
life.
My President University mates, Laora Dwi Ariana, Tan Julia
Christine Fransisca,
Endin Zainudin, Yorico Yohanes Lampus, Muhammad Fikri, Ni Putu
Vanny
Christina, Erynda Bhita Safhira, Lia Marcello, Alexandria King,
Pandu Rizki
Akbar, and also to all of my friend that I cannot mention one by
one. Thank you
guys for always be a good friend. Love.
Alhamdulillah Hirobbil’alamin
SKRIPSI ADVISER RECOMMENDATION LETTER
............................................ ii
DECLARATION OF ORIGINALITY
.......................................................................
iii
1.2. Problem Identification
....................................................................................
4
1.4. Research Objectives
.......................................................................................
6
1.6.1 Scope
.......................................................................................................
7
1.6.2 Limitations
..............................................................................................
8
1.7.2 For the Manufacturing Company
............................................................
9
1.7.3. For the Investors
.....................................................................................
9
1.7.4. For Students of President University
...................................................... 9
1.7.5 For Academic Community
......................................................................
9
CHAPTER II LITERATURE REVIEW
....................................................................
10
2.1. Theoretical Review
......................................................................................
10
2.1.4. Profitability
...........................................................................................
22
2.3.1. The Influence of WCTA toward ROE
.......................................................... 29
2.3.2. The Influence of DER toward ROE
.......................................................... 30
2.3.3. The Influence of TAT toward ROE
...........................................................
30
2.3.4. The Influence of NPM toward ROE
.......................................................... 30
2.4. Theoretical Framework
....................................................................................
31
3.4.1. Dependent Variable
...................................................................................
37
Classical Assumptions in this research include the Normality,
Multicollinearity,
Heteroscedasticity, and Autocorrelation test.
...................................................... 39
3. Heteroscedasticity Test
................................................................................
42
3.5.3. Hyphothesis Test
.......................................................................................
45
4.1. Company Profile
..............................................................................................
48
4.3. Descriptive Data
...............................................................................................
54
4.4.2. Hypothesis Test
.........................................................................................
63
CHAPTER V CONCLUSION AND RECOMMENDATION
................................... 70
5.2. Conclusion
........................................................................................................
70
5.2. Recommendation
..............................................................................................
71
Table 3.1 Characteristics of Quantitative and Qualitative method
............................. 34
Table 3.2 List of Manufactured Company Listed on IDX
.......................................... 35
Table 3.3 List of Equation
.........................................................................................
39
Table 3.4 Durbin Watson
...........................................................................................
44
Table 4.1 Descriptive Statistics
..................................................................................
54
Table 4.2 Tolerance and VIF Value
............................................................................
59
Table 4.3 Durbin Watson
...........................................................................................
62
Table 4.4 T-Test Result
..............................................................................................
63
Table 4.5 F-Test Result
..............................................................................................
65
Table 4.6 Adjusted R² Table
.......................................................................................
66
xi
Figure 3.3 Heteroscedasticity Test
Example..............................................................
43
1.1. Background of Study
The company is one form of business that are looking for an
advantage or profit,
which run in the field of trade, in the production of goods, and in
the business
services that has an organizational structure, management, location
and the
employees. According to (Kansil 2001) The Company is any form of
business entity
that operates any type of business that is permanent and
continuous, and established,
work, and is domiciled in the territory of Indonesia for the
purpose of gain or profit.
In this developing economics, every company competes to produce
good
performance for their own company. Performance of every company is
really
affected to the flow of their financial. In this part (Juliana and
Sulardi 2003) said that
the public will measures the success of the company based on its
performance. The
company performance can be assessed through the financial
statements presented on
a regular basis each period. According to Brigham and Endhart
(2003) the accounting
information regarding the company's operations and financial
position can be
obtained from the financial statements. Accounting information in
the financial
statements is very important for businesses as investors in
decision making. The
investors will choose their investment in the company which
provides a high return
for their advantages.
In the Statement of Financial Accounting Standards (SFAS) or
Pernyataan Standar
Akuntasi Keuangan (PSAK) Framework for the Preparation and
Presentation of
Financial Statements state that the financial statements has
purposed to provide
information regarding the financial position, performance and
shifting in financial
2
position of the company that is useful for a large number of users
in making
economic decisions. For economic decision making, the business
person needs
information about the company's financial condition and
performance. One example
of economic decision is when making a decision to do the prediction
and estimation
of profit growth.
In order that the information can be useful, the information should
be relevant or
appropriate. Relevant means the information is qualified if the
information can be
influence economics decision of the users with evaluate the past,
presents, and the
future and predict through the past.
In view of the financial performance of the company can use the
financial statements
as an indicator of assessment. Profitability is the important thing
to measure a
company's financial statements. ROE is the ratio that used to
measure the
profitability of a company. ROE (Return on Equity) is a
profitability ratio that
compares between net income (net profit) company with net assets
(equity or
capital). This ratio measures how much of the profits generated by
the Company
compared to the capital that deposited by shareholders.
In order to interpret the information that is relevant to the
purposes and the users
concerns have developed a set of analytical technic that are based
on financial
statements that have been published. One of the technic which
applied in the business
practice is the financial ratio analysis.
According to Simamora (2002), ratio analysis is an important way to
declare
meaningful relationship betweeen the components of the financial
statements. The
Ratio describes a relationship beween one certain number with
another number, and
by using the analytical tools which is ratio that explain or
describe the analyzer
which good or bad the financial position of each company. In
general ratio can be
groupped into four (4) basic types, namely Liquidity Ratio, is
ratio that measures a
company’s ability to meet its short-term financial obligations,
Solvability Ratio /
3
Leverage, is a ratio that measures how far the company meet the
debt of Activity
Ratio, is the ratio that measures how effectively the company uses
its financial
sources, Profitability Ratio, is the ratio that measures the result
from the policies and
decisions.
In using the liquidity ratio, leverage ratio, activity ratio, and
profitability ratio each
has a different ratio techniques. The Liquidity ratio using the
Working Capital to
Total Assets (WCTA), the Solvability ratio/Leverage using Debt to
Equity Ratio
(DER), the Activity ratio using Total Assets Turnover (TAT), and
for the
Profitability ratio using Net Profit Margin (NPM) to determine the
financial ratios
toward Return on Equity (ROE) in the Manufacture Company.
According to the research of Takarini and Ekawati (2003) states
that liquidity ratio
that has significant positive influenced toward profitability one
year ago is Working
Capital to Total Assets (or named as WCTA), WCTA shows the ratio
between
working capital (that is current assets minus current liabilities)
toward total assets.
The higher of WCTA shown the higher of working capital that
obtained by the
company compare to the total assets. With a large working capital,
the company's
operations can be going well so that the income will increase and
it can increase the
profits. However, the research that conducted by Suwarno (2004)
showed that
WCTA has no significant effect on earnings profitability next
year.
Debt to Equity Ratio (named as DER) shows a comparison between the
total debts to
equity (Ang, 1997). The higher of DER showed higher use of debt as
a source of
corporate funding. This can pose considerable risk for the company
when the
company is unable to pay such obligations at maturity, so it will
disrupt the
continuity of the company's operations. In addition, the company
will be faced with
high interest costs that can reduce profitability of the
company.
Total Assets Turn over (TAT) is a comparison between sales with
total assets of each
company which the ratio is describes the ratio of total asset
turnover rate in a certain
4
period. Total assets turnover is a ratio that indicates the level
of efficiency of the
overall assets of the company in generating certain sales volume.
Total assets
turnover is a ratio that describes the asset turnover measured by
the volume of sales.
So the greater this ratio is better, which means that the assets
can be quickly spun and
reach the profit and shows the more efficient use of overall assets
in generating sales.
In other words, the same amount of assets that can increase sales
volume if the assets
turn over enhanced or enlarged.
According to Asyik and Soelistyo (2000) in their research shows
that the profitability
ratio which has siginificant influenced toward the profitability is
Net Profit Margin
(NPM) and Gross Profit Margin (GPM). NPM is a comparison between
the net profit
after tax (that is profit before income tax minus income tax) to
net sales (net sales).
This ratio measures a company's ability to generate net income to
achieved total net
sales of the company.
Based on empirical evidence that connected to the financial ratios
(WCTA, DER,
TAT, and NPM) towards Return on Assets (ROE) still showed different
results, this
research is examine how the influence of the financial ratios
toward profitability,
especially in the sector manufacturing industry in Indonesia Stock
Exchange (IDX)
the period 2008 to 2013. Selection of a manufacturing company in
IDX because the
manufacturing industry is the major industry groups listed on the
Stock Exchange
and the selection of the manufacture company into this research is
listed as the top 50
of companies based on Forbes Magazine Indonesia.
1.2. Problem Identification
The assessment of the financial performance of a company is very
important for
every user or to the people which concerned of the company.
Performance of a
5
company can improve its target consumers and investors to use the
company as a
turnover of investors and consumers.
Based on the difference between the profitability of the group of
companies and
between periods, and there is dissimilarities (inconsistency)
between the researchers,
the research was conducted to examine the effect of Working Capital
to Total Assets
(WCTA), Debt to Equity Ratio (DER), Total Assets Turnover (TAT),
and Net Profit
Margin (NPM) toward Return on Equity (ROE) (Case study of Top
10
Manufacturing Companies based on Forbes Magazine Indonesia in 2015
that listed in
Indonesia Stock Exchange period 2008-2013) to get the real results
of the analysis.
1.3. Statement of the Problem
This research is about Analysis The Influence of Working Capital to
Total Assets
(WCTA), Debt to Equity Ratio (DER), Total Assets Turnover (TAT),
and Net Profit
Margin (NPM) toward Return on Equity (ROE) (Case study of Top
10
Manufacturing Companies based on Forbes Magazine Indonesia in 2015
that listed in
Indonesia Stock Exchange period 2008-2013) Then, there are
statements of the
problem:
1. Is there a partial positive significant influence of Working
Capital of Total
Assets (WCTA) toward Return on Equity (ROE)?
2. Is there a partial negative significant influence of Debt Equity
Ratio
(DER) toward Return on Equity (ROE)?
3. Is there a partial positive significant influence of Total
Assets Turnover
(TAT) toward Return on Equity (ROE)?
4. Is there a partial positive significant influence of Net Profit
Margin
(NPM) toward Return on Equity (ROE)?
6
5. Is there a simultaneous significant influence of Working Capital
of Total
Assets (WCTA), Debt Equity Ratio (DER), Total Assets Turnover
(TAT),
and Net Profit Margin (NPM) toward Return on Equity (ROE)?
1.4. Research Objectives
Based on statement of the problem above problems then the
objectives of this study
are:
1. To analyze the partial positive significant influence of Working
Capital of
Total Assets (WCTA) toward Return on Equity (ROE)
2. To analyze the partial negative significant influence of Debt
Equity Ratio
(DER) toward Return on Equity (ROE)
3. To analyze the partial positive significant influence of Total
Assets
Turnover (TAT) toward Return on Equity (ROE)
4. To analyze the partial positive significant influence of Net
Profit Margin
(NPM) toward Return on Equity (ROE)
5. To analyze the simultaneous significant influence of Working
Capital of
Total Assets (WCTA), Debt Equity Ratio (DER), Total Assets
Turnover
(TAT), and Net Profit Margin (NPM) toward Return on Equity
(ROE)
1.5. Definition of Terms
1. Working Capital of Total Assets (WCTA) shows the ratio
between
working capital (which current assets minus current liabilities)
toward
total assets. The higher WCTA showed the higher of working capital
that
obtained by the company compare to the total assets.
7
2. Debt to Equity Ratio (DER) shows a comparison between the total
debts
to equity. The higher of DER showed higher use of debt as a source
of
corporate funding.
3. Total Assets Turn over (TAT) is a comparison between sales with
total
assets of each company which the ratio is describes the ratio of
total asset
turnover rate in a certain period. Total assets turnover is a ratio
that
indicates the level of efficiency of the overall assets of the
company in
generating certain sales volume.
4. Net Profit Margin (NPM) is a comparison between the net profit
after tax
(that is profit before income tax minus income tax) to net sales
(net sales).
This ratio measures a company's ability to generate net income
to
achieved total net sales of the company.
5. Return on Equity (ROE) is a ratio that used to measure the
profitability of
each company. Return on Equity (ROE) is a profitability ratio
that
compares between net income (net profit) company with net assets
(equity
or capital). This ratio measures how much of the profits generated
by the
Company compared to the capital subscribed by shareholders.
6. Manufacturing Company is a company in which the process
industries for
processing raw materials into finished goods that eligible to be
marketed.
Manufacturing itself is a process that aims to transform raw
materials into
finished goods that use technology.
1.6. Scope and Limitations
1.6.1 Scope
This research is conducted to analyze the influence of Working
Capital of Total
Assets (WCTA), Debt Equity Ratio (DER), Total Assets Turnover
(TAT), and Net
Profit Margin (NPM) toward Return on Equity (ROE) case study of Top
10
8
Manufacturing Companies based on Forbes Magazine Indonesia in 2015
that listed in
Indonesia Stock Exchange period 2008-2013.
1.6.2 Limitations
For some reasons in finishing this study, the researcher makes some
limitations as
follow:
1. This research is done in five (6) year’s period, from year 2008
until 2013,
thus the result of this research is only valid for that period of
time.
2. This research discusses four categories that expected to
influence ROE
they are Working Capital of Total Assets (WCTA), Debt Equity
Ratio
(DER), Total Assets Turnover (TAT), and Net Profit Margin
(NPM).
3. The populations used in this study are 10 manufacturing
companies based
on Top 50 companies on Forbes Magazines that listed in the
Indonesia
Stock Exchange from 2008 until 2013 and complete financial
ratios
correspond with the variable that will be used in this
research.
1.7. Research Benefits
This research is meant to give valuable knowledge, information, and
solution for the
following parties:
1.7.1 For the Researcher
To researcher, this is one of the requirements to fulfill
everything that needed to
accomplish Bachelor Degree (S1 / B.Sc.) from President University.
It is also giving
the researcher the experience in writing a research and having a
deeper understanding
about banking sector of financial performance that can be analyze
through the
influence of financial ratios toward profitability ratio
(ROE).
9
1.7.2 For the Manufacturing Company
The result show the level of financial performance for
Manufacturing Company
based on financial ratio (WCTA, DER, TAT, and NPM) in comparing to
the ROE, it
is expected to become input and consideration and to the policy
makers in making
policies relating to manufacturing companies in order to improve
the company’s
financial performance by determining the factors that can influence
the value of
ROE.
1.7.3. For the Investors
To give the information regarding the financial condition of a
company for interested
parties or investors, that can be considered for the decision
making process.
1.7.4. For Students of President University
The results of this study are expected to provide information,
knowledge and also
being a reference for further research, especially for students at
President University,
in understanding the influence of financial ratio toward
profitability especially in the
manufacturing company.
1.7.5 For Academic Community
To President University especially examiners, this can be a
reference to passed
researcher, to fulfill the qualifications in getting bachelor
degree. This research can
be a contribution of thought specialized in the field of financial
ratios analysis study
and provide a reference for conducting a related research
topic.
10
2.1. Theoretical Review
2.1.1. Financial Statement
Financial Statement are use to determine the development of a
company and those
financial’s condition. Basically, financial statement is kind of
the result from the
report process, classifying and the summarizing from some case
based on financial
nature with right direction as a communication tools between
financial data or
activity of a company with related parties. Related parties toward
the financial
statements are (Munawir, 2004):
1. The Owner
The owner of the company which the manager will be submitted as the
leader
needs financial statement to measuring his performance in leading
the company
and the successful manager could be measured by the profit that
company’s got.
Based on the financial statement analysis, if the results that
management
company achieved has not satisfied, then the owner of the company
take an
action such as replace the management of the company or selling the
shares.
2. Manager
For the manager itself, financial statement is his responsibilities
to the owner of
the company as the trust that the owner’s given to him. Besides
that, the financial
statement is used to measuring the cost of some company activities.
To measures
the performance of every division has given the authority and
responsibility
based on their task and determines the policies or new procedure to
achieve best
result.
11
3. Creditor
Before the creditors make a decision to give or refuse the credit
from any
company, first we need to know about the financial condition of
related company.
Financial statement are needed to measure the company in pay its
debt, interest
expense, and to know that the credit given is enough to insured
from that
company.
4. Investor
The investors are responsible for the financial statement of each
company as the
determiner policies of its investment, will the company have a good
prospect and
gain an advantages for the company. The future prospect and
company’s
development will continued to use in order to know the investment
insured.
5. Government
Government will have a responsible toward financial statement of a
company to
determine how much taxes must be paid.
6. Employees
The employees need financial statement to measure the company in
provides
wages/salary and social insurance and measure whether the bonus are
worthy
compared to the profit gained from the company in certain
period.
In general, the common use of financial statement from accountant
basically for
the user prediction. The financial statement are presented should
be relevant with
the user needs. Therefore, financial statement analysis is very
needed to
understand the information of financial statament (Asyik and
Sulistyo, 2000).
According to Hanafi and Halim (2005), there are three basic forms
of financial
statement: Balance Sheet, Income Statement, and Cash Flow.
12
1. Balance Sheet
Balance Sheet are use to describe the financial condition of the
company at a
specific time. The Balance Sheet is a systematic report about
assets, liabilities
and capitalof a company at a specific date/time. Balance Sheets
consist of three
main parts: assets, liabilities, and capital.
Assets consists of (Ang, 1997):
1. Current Assets
Current assets are intangible assets which in cash and can be
released in the
short-term period (less than one year). For the example: cash
(property of the
company in cash), temporary investment/short-term (investment in
bonds,
stock, and securities with maturities less than one year), accounts
receivable
(accounts receivable arising from the credit sales), inventory
(inventory of the
goods purchased and goods produced, either raw materials,
semi-finished or
finished goods).
2. Non-current Assets
Non-Current Assets are intangible assets which cannot be released
in cash but
can be released in the long-term period (more than one year). For
the
example: bonds, lands, building, and machinery.
Liabilities is a financial liability to other parties who have not
been fulfilled.
Debt is a source of funds/capital of company from creditors. Debt
can be
divided into two (Ang, 1997):
1. Current Liabilities
Current Liabilities are liabilities which has maturities less than
one year. For
the example: Short-term bank loans, notes payable, and accounts
payable
(debt arising from purchasing goods in credit).
13
2. Non-current Liabilities
Non-current liabilities are liabilities which has maturities more
than one year.
For the example: bank loans, long-term notes, bonds, and loans
to
shareholders.
Capital or equity is right or part that owned by the owner of the
company
indicated in thw heading of capital, surplus and retained earnings.
Capital or
equity also meant the excess value of assets owned by the company
of all its
debts (Munawir, 2004).
2. Income Statement
Income statement is a systematic statement of income, the cost of
the income
earned during the certain period (Munawir, 2004). According Mamduh
M. Hanafi
and Abdul Halim, in the book Analysis of Financial Statements
(2002), Income
Statement is summarizing the result of the company activities in
certain
accounting period. Income Statement itself has its elements as
follows:
1. Income
Is the inflow or assets increasing in a company's or settlement of
liabilities
(compensation both) during a certain period, arising from the
selling goods,
delivery of services, and other income elements.
2. Cost
Is the increases of equity or uses during a certain period which
arising from
selling goods, delivery of services, and the other.
3. Profit
Is the increases in net assets that arising from the transactions
or another and
causing by the condition that influence the net assets.
14
4. Loss
Is the decreases from net assets that arising from the transactions
or another
and the condition that influence the net assets.
3. Statement of Cash Flow
This statements are presenting about information of cash flows in
or out at a
period which is the result of the principal activities of the
company, which is
operating, investing and financing activities. Operating activities
include
transactions involving the production, sale, receive of goods and
services.
Investment activities include the purchase or sale of investment
buildings, plant
and equipment. Financing activities include transactions to obtain
funds from
bonds, debt repayment shares and emissions (Hanafi and Halim,
2005).
2.1.2. Financial Statement Analysis
Financial statement which the meaning can be seen in the previous
statement can be
analyzed in many ways. Before going any further, the financial
statement analysis
can be defined in many kind of word. According to Sofyan S.Harahap
(2006), the
financial statement analysis is divided into two, analysis and
financial statement. The
word of analysis is to solve or describe one unit into the smallest
unit, while the
financial statement is the statement that described its financial
condition and the
result of company performance in a certain period. The point of the
statement above
is the financial statement analysis is to describe the financial
statement items become
smaller information units and see the relationship which
significant or got an
meaning between one another between the quantitative data as well
as data on non
quantitative in order to determine the condition deeper financial
extremely important
in the process of generating a fixed decision.
15
According to Sofyan S.Harahap, in book of Critical Analysis of
Financial Statement
(2006), one of the important task after the end of the year is to
analyze financial
statement of a company. This analysis based on financial statements
that have been
prepared. Objective analysis of the financial statements are as
follows:
1. Screening
This analysis has a purpose to determine the situation and
condition of a
company’s financial statement without directly to the field.
2. Understanding
Following the financial condition and the result of a
company.
3. Forecasting
This analysis were performed tp predict the financial condition of
a company in
the future.
4. Diagnosis
This analysis are intended to see the possibility of any problems
could happened,
whether in management, operations, financial, or the other problems
withing the
company.
5. Diagnosis
This analysis were performed to asses the management performance in
managing
the company.
2.1.3. Financial Ratio Analysis
Financial ratio is a statement which simplify the information
describes about
relationship between one and another ratios. These simplify method
can easier to
16
maintain the relationship between one and another ratio and it can
compared with
another ratio, and in the end the result of the information will be
shown and we can
make assessment for it. The Financial analysis is a main tool that
used to make a
prediction of the company development in the future. The
information and
description of the financial development of one company can be
obtained in doing
several interpretation from the financial statement itself, which
is connected the
elements exist in the financial statement such as all the assets
with the other assets,
liabilities with the other liabilities, liabilities with the
assets, balance sheet with the
income statement, will be obtained some of description about the
financial condition
of a company. The following will presented several definition of
Financial Ratio
Analysis by economists:
According to Munawir (2007) that financial statement as follow:
“The ratios are
describes about the relationship or comparison (mathematical
relationship) between
certain amount with the other amount by using analysis tools that
is ratio. The ratio
will be explained or described to the analyzer about good or bad
the condition or
financial position of a company practically if the number of the
ratio is being
compared with the number of the comparison ratio that used as
standardization”.
Sofyan (2006) state that “Financial ration is the number that
generate by the result of
the comparison between one and another ratio which relevant and
significant”.
Muchlis (2007) also state that “Ratio analysis is an analysis tools
that very helpful if
it is compared with the standard ratio.
2.1.3.1. The Objectives and Benefits of Financial Ratio
Analysis
The financial ratio analysis mainly aims to have an overview about
good or bad the
financial condition of a company when doing an analyzed. Basically
from the result
of analysis, the management will obtain the information about the
strength and
weakness of the company. Those information will help the manager in
understanding
17
what will the company do and it will help the manager to make an
important decision
in the future. The financial ratio analysis is not only important
for the management
side but it’s important too for the external side. For the
external, the financial ratio
analysis is important to obtain an overview about the financial
development of a
company. By knowing the financial development, the company can
decide whether
to invest or not in that company.
The benefits of financial ratio analysis is to know if there is any
strength or
weaknesses of the company’s financial for the years ago. By
comparing the number
of the financial ratio with the standards established will obtain
the other benefits that
can be known whether the financial aspects of certain companies are
above or below
standard. If the company in below standard, the management will
find out what
factors causes and it will take the fiscal measures to be able to
raise the company’s
ratio back.
2.1.3.2. Types of Financial Ratio Analysis
Dennis (2006) state that financial ratio analysis is a best method
use to obtain the
description about financial condition of the whole company. This
analysis is use as
internal analysis for company’s management to determine the result
of financial
gained to the future and as external analysis for the creditors and
investor is to
determine the policies in make a loans and investing of a company.
The financial
ratio analysis divided into two types based on variant uses in the
analysis, which are
(Ang, 1997) :
1. Univariate Ratio Analysis
Univariate Ratio Analysisis financial ratio analysis which used one
variate in
doing the analysis. The example is Profit Margin Ratio, Return on
Asset (ROA)
and Return on Equity (ROE)
18
2. Multivariate Ratio Analysis
Multivariate Ratio Analysis is financial ratio analysis which used
more than one
variety in doing the analysis. The example is Alman’s Z-Score and
Zeta Score.
Financial ratio is a comparison between two data’s which contained
in the financial
statement in a company. Financial ratio is used by a creditor to
determine the
company performance to show the ability of a company in pay the
debts (Dennis,
2006).
Financial ratios were categorized in different terms, based on its
analysis purposed.
According to Nugroho (2003), several financial ratio that often
used by researcher in
achieving their goals is profitability ratio to measuring the
company ability in to
gaining profit in sales, total assets, equity, and liquidity ratio,
to measuring the
company’s ability to fulfilled short-term obligation on time.
Brigham and Daves
(2001) and Meythi (2005) state that financial ratio were
categorized become liquidity
ratio, solvability ratio (leverage ratio), and activity ratio, and
profitability ratio.
Weygand et. Al (1996) and Meythi (2005) were categorizing the
financial ratio into
three, which are liquidity ratio, profitability ratio, and solvency
ratio. In general
financial ratios were categorized into liquidity ratio, leverage
ratio, activity ratio, and
profitability ratio (Riyanto, 1995).
1. Liquidity Ratio
Liquidity ratio shows the company’s ability to resolve the current
liabilities (less
than one year). Liquidity ratio use in this research is Working
Capital to Total
Assets (WCTA). Working Capital to Total Assets (WCTA) is comparison
between
current assets minus current liabilities in current assets.
According to Takarini
and Ekawati (2003) liquidity ratios which are Working Capital to
Total Assets
(WCTA) has a positive significant toward profitability. WCTA shows
the ratio of
working capital (current assets minus current liabilities) to total
assets. If the
19
WCTA increasingly high, the greater working capital acquired
companies
compared to total assets. With a large working capital, the
company's operations
will be going well, so that the income increases and it will
increasing the profits
of the company.
In this study, the liquidity ratio is peroxide with WCTA, because
based in the
previous research; the liquidity ratio is the most influence for
the profit grows.
WCTA can be formulated as follows (Riyanto, 1995).
Current assets in form of a cash, inventories, and trade
receivables (income from
sales). Current assets in form of trade payable, taxes payable and
current
maturities of long-term debt. Total assets are a total from the
current assets with
fixed assets (ICMD, 2010).
2. Solvability / Leverage Ratio
Solvability ratio shows the company’s ability to fulfill the
long-term liabilities.
Solvability use in this research is Debt to Equity Ratio (DER).
Debt to Equity
Ratio (DER) is a comparison between total current liabilities and
long-term debt
equity. According to Kashmir (2011), in practice the use of
leverage by the
company has two effects, first it can increase the profit if the
interest paid is less
than the return obtained from the use of debt and this condition
occurs when the
economy declines, and the use of debt can also reduce the interest
paid if the
profit is greater than the return obtained and this condition
occurs when the
economy is high. Debt to Equity Ratio (DER) high will charge
companies to
charge higher rates. The high cost of the interest to be paid by
the company will
have an impact on corporate profits decline. Conversely, a low DER
means the
cost of interest paid by the company are also low that corporate
profits will
WCTA = ( – )
20
increase which will affect the company's profit growth. This ratio
can be seen
from the negative relationship between leverage and profit
growth.
DER can be formulated as follows (Riyanto, 1995):
Total liabilities are the total from the current liabilities plus
long-term debt.
Owner’s equity is a source of fund from the owners of a
company.
3. Activity Ratio
According to Ang (1997), activity ratio shows the ability and
efficiency of the
company to use the assets owned or turnover from the assets.
Activity ratio use in
this research is Total Assets Turnover (TAT). Total Assets Turnover
(TAT) is a
comparison between net sales and total assets. TAT showed the
efficiency of
using total assets company to support sales. The larger the company
TAT showed
the more efficient to use of all assets company to generate net
sales. The faster
turnover of assets of a company to support the activities of net
sales, it will
increase the profits of the company (Ang, 1997). It is supported by
Ou (1990) and
Fun and Sulistyo (2000) in his research showed that TAT positive
effect on
earnings growth.
In this research activity ratio are peroxide with the Total Assets
Turnover (TAT),
because in previous research this ratio is the most influence
toward profitability.
TAT can be formulating as follows (Ang, 1997).
Net sales are the result from net sales for a year. Total assets
are a total from total
assets plus fixed assets.
4. Profitability Ratio
According to Susan Irawati (2006), profitability ratio use to
measure the
efficiency of the company's assets or the ability of a company to
generate profit
for a certain period (usually semi-annual, quarterly, etc.) to see
the company's
ability to operate efficiently. Profitability ratio use in this
research is Net Profit
Margin (NPM). Net profit margin measures profitability after
consideration of all
expenses including taxes, interest, and depreciation.
NPM can be formulated as follows:
NPM is one of the profitability ratios. NPM shows the company's
ability to
generate net income to total net sales (RJ, 1995). The higher of
NPM indicates
the higher of profit that company’s obtained. With a higher profit,
the expanding
opportunities for the companies to increase their capital without
going through
new debt, so that the income can be increased (Reksoprayitno,
1991).
Profitability is the important thing to measure a company's
financial statements.
ROE is the ratio that used to measure the profitability of a
company. ROE
(Return on Equity) is a profitability ratio that compares between
net income (net
profit) company with net assets (equity or capital). This ratio
measures how much
of the profits generated by the Company compared to the capital
that deposited
by shareholders.
ROE =
2.1.3.3. The Advantages of Financial Ratio Analysis
Compared with the other technique analysis, financial ratio
analysis has some
advantages, which are:
1. The ratio is kind of number or statistical overviews which easy
to be read and
interpret.
2. The ratio can be substitute as the alternative of the financial
statement
information were detailed and complicated.
3. The ratio can help a company to determine its position in the
global
Industries.
Besides its advantages, financial ratio analysis has its
weaknesses. According to
Sawir (2005), there are 4 weaknesses of financial ratio analysis,
as follows:
1. The financial ratio analysis has difficulties in identification
the industry
category from the company which run in several business
fields.
2. The financial ratio is arranged from the accounting data and
it’s influenced by
the definition and could be manipulated.
3. The average industry information are general data and it’s just
estimated.
2.1.4. Profitability
Profitability can be operationally as differences between realized
incomes that come
from the transaction in one period with related cost. Besides, IAI
in Chairi and
Gozhali (2003) state that increasing the economic benefits during
the accounting
23
period in a form of income or additional assets or liabilities
decreasing that cause the
increases of equity which are not from the contribution of capital.
The definition of
income held by the structure of the accounting nowadays is a
profitability of
accounting is the differences between the measurement of income and
expenses. The
size of the profit as a measure of the increase depends heavily on
the accuracy of the
measurement of income and expenses. So in this case the profit is
only a figure of its
own articulation and not defined in economic as well as the assets
or debts (Chariri
and Widodo, 2003).
According Harahap (2005) profitability is an important figure in
the financial
statements because several reasons such as: profitability is the
basic for calculating
the tax, the guidelines in determining the investment policy and
decision-making, the
basic for forecasting earnings and economic event of other
companies in the future,
based the calculation and assessment of efficiency in running the
company, as well as
a basis for performance appraisal or performance of the
company.
Belkaoui in Chariri and Ghozali (2003) states that the
profitability has several
characteristics are as follows:
1. Profitability are based on transactions that actually
happened
2. Profitability based on the principle of periodization, which
means that the
company's achievements in a particular period.
3. Profitability is based on the principle of revenue that requires
special
understanding of the definition, measurement and recognition of
revenue.
4. Profit requires measurement of the costs in the form of
historical costs
incurred by the company to get a certain income.
5. Profitability is based on the matching principle (matching)
between income
and expenses that are relevant and related to the income.
An appropriate comparison of revenues and expenses are described in
the income
statement. The presentation of profit through the report is an
important focus of the
24
company's performance. Performance of the company is the result of
a set of
processes at the expense of several resources. The one of the
company's performance
appraisal parameter is profitability.
The profitability can be calculated by deducted from the current
profit with the profit
from previous period and then divided with the profit from the
previous period
(Takarini and Ekawati, 2003).
2.1.4.2. The Factors that influenced the Profitability
According to the Hanafi and Halim (2005) said that the earnings
growth is influenced
by several factors, which are:
1. The size of the company
The larger a company, then the accuracy of earnings growth is
expected to be
higher.
Newly established company lacks experience in increasing profits,
so the
accuracy is still low.
3. The level of leverage
If the company has a high debt level, the managers tend to
manipulate
earnings so it can reduce the accuracy of earnings growth.
4. The level of sales
If the level of sales in the past is high, the level of sales in
the future will be
higher, so the earnings growth will be higher.
5. Changes in previous profit
The higher the profit change in the past, the more unpredictable
the profit
earned in the future.
2.2. Previous Research
Studies that analyze about the effect of independent variables
toward dependent
variable have been done before by several researchers. Review of
previous research
can be seen as covered in Table 2.1 below:
Table 2.1
Previous Research
1 Indarti
prediction toward
positive influence
toward Profitability
in 5%
positive significant
influence toward
2.3.1. The Influence of WCTA toward ROE
WCTA is one of the liquidity ratios (Riyanto, 1995). Liquidity
Ratio shows the
company's ability to use the current assets of the company, so it
is able to pay its
short-term debt on time required (Machfoedz, 1999).The higher of
WCTA shown the
higher of working capital that obtained by the company compare to
the total assets.
With a large working capital, the company's operations can be going
well so that the
company is able to pay the debt and automatically the income will
increase and it can
influence the profits (Reskoprayitno, 1991). The higher of WCTA
will increase the
profit which will influence the profitability. This is because the
efficiency of the
difference between current assets and current liabilities. Takarini
and Ekawati (2003)
state that WCTA have positive effect on profitability for next
year.
30
2.3.2. The Influence of DER toward ROE
DER is one of the solvability ratios. DER shows a comparison
between the total
debts to equity (Riyanto, 1995).The higher DER showed the higher
use of debt as a
source of corporate funding. This can cause considerable risk for
the company when
the company cannot afford to pay the liability at maturity, and it
will disrupt the
continuity of the company's operations. In addition, the company
will be accepting
the high interest costs that can reduce company profit. This is
state by research
Indarti (2000) which showed that the DER a negative effect on
profit growth.
2.3.3. The Influence of TAT toward ROE
TAT is one of the activity ratios. TAT showed the efficiency of
using total assets of
the company to support sales (Ang, 1997). The highest of the
company showed its
TAT it will showed the efficiency of use the entire assets of the
company to generate
net sales. The faster turnover of assets of a company to support
the activities of net
sales, then the income will be increase that will affect to the
higher of profit’s got
(Ang, 1997).This is supported by Asyik and Soelistyo (2000) in his
research shows
that the positive affect on growth TAT toward profitability.
2.3.4. The Influence of NPM toward ROE
NPM is one of the profitability ratios. NPM shows the company's
ability to generate
net income to total net sales (RJ, 1995). The higher NPM indicates
that the greater
the net income derived from the company's net profit activities
sales. With large,
expanding opportunities for companies to increase their capital
without going
through new debt, that the income be increased (Reksoprayitno,
1991) . This is
supported Suwarno (2004) and Fun and Soelistyo (2000) in his
research showed that
NPM significant positive effect on profit growth next year.
31
2.4. Theoretical Framework
This research will study about The Influence of Working Capital to
Total Assets (
WTA), Debt to Equity Ratio (DER), Total Assets Turnover (TAT), and
Net Profit
Margin (NPM) toward Return On Equity (ROE) (A Case Study of Top
10
Manufacturing Companies based on Forbes Magazine Indonesia in 2015
that listed in
Indonesia Stock Exchange period 2008-2013). The theoretical
framework will use
some methods based on the independent variables (X1, X2, X3 and X4)
affect the
dependent variable (Y). The independent variables in this research
are Working
Capital to Total Assets (X1), Debt to Equity Ratio (X2), Total
Assets Turnover (X3)
and Net Profit Margin (X4) and for dependent variable is Return on
Equity (Y).
Figure 2.1 Theoretical Framework
Source: Adjusted by Researcher
2.5. Hypothesis
Hypothesis is a temporary allegation of the research that will be
examined, based on
the literature review above then hypotheses that can be submitted
as a temporary
answer to the problems of this study are as follows:
Hypothesis 1: Working Capital to Total Assets (WCTA) has a partial
positive
significant influence toward Return on Equity (ROE)
Hypothesis 2: Debt to Equity Ratio (DER) has a partial negative
significant influence
toward Return on Equity (ROE)
Hypothesis 3: Total Assets Turnover (TAT) has a partial positive
significant
influence toward Return on Equity (ROE)
Hypothesis 4: Net Profit Margin (NPM) has a partial positive
significant influence
toward Return on Equity (ROE)
Hypothesis 5: Working Capital to Total Assets (WCTA), Debt to
Equity Ratio
(DER), Total Assets Turnover (TAT), and Net Profit Margin (NPM)
have a
simultaneous significant influence toward Return on Equity
(ROE).
33
3.1. Research Design
In doing this research the researcher used method to get the
result. There are two
method that often used by the researcher which are Quantitative and
Qualitative
method. Quantitative research gathers data in numerical form which
can be put into
categories, or in rank order, or measured in units of measurement
this type of data
can be used to construct graphs and tables of raw data. Qualitative
research gathers
information that is not in numerical form. For example, diary
accounts, open-ended
questionnaires, unstructured interviews and unstructured
observations. Qualitative
data is typically descriptive data and as such is harder to analyze
than quantitative
data.
According to Robert Donmoyer (in Given, 2008) Quantitative method
is approaches
to empirical study to gather, analyze, and show data in numerical
rather than
narrative. For this research, researcher use quantitative method
since the purpose isto
analyze the influence and significant relationship between the
independent variables
toward the dependent variable. Quantitative method use numbers to
prove or
disapprove a hypothesis of the research. It provides fundamental
connection between
empirical observation and mathematical expression of quantitative
relationship
(Castellan, 2010). The numerical data collected can be generated by
using software
like Statistical Package for the Social Science (SPSS), Views, and
other statistical
Source: ACAPS (2012)
in study
study progress or afterwards
Test Theory Develop Theory
narrow
and broad
Reduction, control, precision
the parts
35
This research use one dependent variable, which is Return on Equity
(ROE), and four
independent variables, which are Working Capital to Total Assets
(WCTA), Debt to
Equity Ratio (DER), Total Assets Turnover (TAT), and Net Profit
Margin (NPM).
The information gathered during period of 2008 – 2013.
3.2. Sampling Design
3.2.1. Population
Population in the statistics refers to a group of individuals with
distinctive
characteristics of concern in a study. Margono (2010) said that
"The population is all
the data which we are concerned in a scope and in specific time".
The population
used in this study is the manufactured company that listed in
Indonesia Stock
Exchange (IDX) in the period of the study (period 2008 –
2013).
Table 3.2
No. Company Name
3 PT. HexindoAdiperkasaTbk
4 PT. IndocementTbk
7 PT. ArwanaCitramuliaTbk
9 PT. Holcim Indonesia Tbk
10 PT. Martina BertoTbk
3.2.2. Sampling Technique
The sampling method were used for this research is purposive
sampling. A form of
non-probability sampling in which decisions concerning the
individuals to be
included in the sample are taken by the researcher, based upon a
variety of criteria
which may include specialist knowledge of the research issue, or
capacity and
willingness to participate in the research (Paul Oliver, 2006). The
purposive sampling
criteria that applied in this research are:
1. The manufacturing company that listed on Indonesia Stock
Exchange
during 2008 - 2013
2. The top ten greatest companies based on Forbes in 2015 and it’s
existing
in Indonesia Stock Exchange.
3. The availability of its financial statement during 2008 –
2013.
3.2.3. Sample Size
By using purposive sampling technique, the researcher found that 10
greatest
companies based on Forbes magazine and it’s existing in IDX are
eligible for this
research. The sample was taken by using panel data. Kuncoro
Mudrajad (2003) state
that according to the time of collection, data divided into three
types which are time
series, cross section and panel data. In this research, the
researcher uses panel data.
Panel data, also known as longitudinal data or or cross-sectional
time series data,
where the data were observed at more than two periods. A panel data
should have n
is defined cases over t periods. Therefore, the total data (N) is n
x t. In this study, the
n is defined by ten companies, while the t is 6, because the
researcher uses six years
(2008-2013). Therefore, the sample size of this research is
60.
37
3.3. Research Instrument
In order to find the required material for the research, researcher
is using software
called Microsoft Excel and SPSS 22.0. Microsoft Excel is a
spreadsheet application
that features calculation, graphing tools, pivot tables, and a
macro programming
language. The researcher uses Microsoft Excel to generate the
regression model
analysis. According to its features, both Microsoft Excel and SPSS
are common
software used to accomplish the research by establishing database
and statistical data
processing. It also can make the analyzing process become faster
and more efficient.
3.4. Definition of Operational Variables
The researcher uses the definition as the variables that will be
measured. The
definition will be explained as follows:
3.4.1. Dependent Variable
Return on Equity (ROE)
The dependent variable use in this research is Return on Equity
(ROE). Return on
Equity (ROE) is the ratio that used to determine the profit for the
company.
3.4.2. Independent Variable
38
The Working Capital to Total Assets ratio is a liquidity ratio that
expresses the net
current assets or working capital of a company as a percentage of
its total assets
(Nayab, 2011).
Debt Equity Ratio (DER)
The Debt Equity Ratio is the ratio which the ratio that measure the
company’s capital
structure. The capital structure is a permanently fund that consist
of long-term debt,
preferred stock, and stockholder’s equity (Wahyono, 2002).
Total Assets Turnover (TAT)
The Total Assets Turnover is ratio that indicates the efficiency
with which the firm
uses its assets to generate sales (Lawrence J. Gitman, 2006). Susan
Irawati (2006)
states that Total Assets Turnover is the ratio that used to measure
the effectiveness of
the assets utilization in generating sales of a company.
Net Profit Margin (NPM)
Net Profit Margin (NPM) is a ratio used to show the company's
ability to generate net
profits.Net Profit Margin is the ratio between net profit and
sales. This ratio is very
important for the operations manager for sales reflecting the
pricing strategies
applied by the company and its ability to control operating
expenses (Bastian and
Suhardjono, 2006).
Here is a table of the definition of operational variables from
dependent and
independent variables:
Profit After Tax to
Current assets-Current
Liabilities to Owner’s
to Total Assets
Income to Net Sales
The researcher used descriptive quantitative method. The reason
using this method is
to identify the growth of each variable.
3.5.1. Classical Assumption Test
Heteroscedasticity, and Autocorrelation test.
1. Normality Test
Normality test aim to test the regression of independent variable
and independent
variable, are both variables have normal distribution or not. The
best regression
model is normal distribution data or close to normal. The normality
test can be
done through graphs and statistical analysis (Ghozali, 2005).
1. Graph Analysis
One of the easiest ways to see the normality of residuals is to
look at the
histogram graph that compares the observational data from the
normal
distribution. However, just by looking at the histogram it can be
confusing,
especially for small sample sizes. Another method that can be used
is to look at
normal probability plots that comparing the cumulative distribution
from the
normal distribution. Basis for decision making of normal
probability plot analysis
are as follows:
1. If the data is spread around and follow the direction of the
diagonal line it
shows the pattern of normal distribution, means that the regression
model
meet the normality assumption.
2. If the data is spread far from do not follow the direction of
the diagonal line
it shows not normal distribution pattern, means that the regression
model
did not meet the normality assumption.
Source www.xlstat.com
Figure 3.2
2. Statistical Analysis
Besides with the graph analysis, normality test can also be seen by
statistical
analysis with the provision if the significant value in the
variable is less than
the value of significant (α = 0.05) that has been determined then
the data is
normally distributed. Conversely, if the significant value of the
Kolmogorov-
Smirnov in the variable is greater from a predetermined value of
significant (α
= 0.05), then the data were not normally distributed.
2. Multicollinearity Test
According to Ghozali (2005) the purpose of this test is to examine
whether in
regression model was found a correlation between independent
variables. In
good regression models there should be no correlations occurred
among the
independent variables. Multicollinearity is situation that
researcher have to
avoid, because it will not good for independent variable correlated
strongly to
each other’s. To detect whether there is the Multicollinearity in
the regression
model can be seen from tolerance value or Variance Inflation Factor
(VIF).
The correlation between one or two independent variable can be
determined
by looking at the Variance Inflation Factor (VIF) and Tolerance
Value.
Procedures of testing Multicollinearity test are as follows:
1. If Tolerance is lower than 0 or bigger than 1, then there
is
Multicollinearity.
2. If Tolerance is between 0 and 1, then there is no
Multicollinearity.
3. If Variance Inflation Factor (VIF) is bigger than 10, then there
is
Multicollinearity.
4. If Variance Inflation Factor (VIF) is lower than 10, then there
is no
Multicollinearity.
3. Heteroscedasticity Test
Heteroscedasticity test is used for knowing whether the data is not
normally
distributed and it also use to know if the variance terms of errors
are
difference across observations. To analyze Heteroscedasticity, the
researcher
uses the output from SPSS Version 21 through scatterplot graph. Z
Prediction
(ZPRED) is the independent variables and S Residual (SDRESID)
as
dependent variable. It can be seen from the scatter plot by looking
at
43
distribution of residual value toward the predicted value. If the
distribution is
spread randomly without any systematic pattern, then the data is
passed the
Heteroscedasticity test. A good multiple regression models that has
no
Heteroscedasticity problem will look like point a, b, c in the
figure below:
Figure 3.3
4. Autocorrelation Test
The purpose of Autocorrelation test is to find whether there is a
correlation
between a set of data in the same variable. Autocorrelation test
only done for
time series data, while cross sectional data like questionnaire
does not need it.
Autocorrelation test can be checked by doing Durbin-Watson
statistical test
(DW test). If the outcome is lower than -2, it means that there is
a positive
autocorrelation problem. If the outcome is more than +2, it means
that there is
a negative autocorrelation problem. Meanwhile, if the result is
between -2 and
+2 it means that there is no autocorrelation problem. Table below
shows the
summary of Durbin Watson test:
Table 3.4 Durbin Watson
Source: www.takonyvtar.hu
3.5.2. Multiple Linear Regressions
This study uses multiple regression analysis model with the
smallest quadratic
equations or ordinary least squares (OLS) to analyze the effect of
Working Capital to
Total Assets (WCTA), Debt to Equity Ratio (DER), Total Assets
Turnover (TAT),
and Net Profit Margin (NPM) toward Return on Equity (ROE), with the
basic model
as follows:
X1 : WCTA (Independent Variable)
e : Standard Error
The regression model shows that the dependent variable (Y) is being
affected by the
coefficient of independent variables (β1−4). It means that if the
value of βi is positive
(+), then there is a positive relation between dependent and
independent variable,
where the increasing value of βi will result to the increasing
value of Y. Otherwise, if
the value of βi is negative (-), then there is a negative relation
between dependent and
independent variable, where the increasing value of βi will result
to the decreasing
value of Y.
3.5.3. Hyphothesis Test
1. Coefficient of Determination (R²)
The coefficient of determination (R²) was essentially measures how
far the
model’s ability to explain variation in the dependent variable.
Small value of R²
means the ability of the independent variables in explaining the
dependent
variables is very limited. Value close to one means that the
independent variables
provide almost all the information needed to predict the dependent
variable
(Ghozali, 2005). In multiple regressions coefficient of
determination is
symbolized as R². Meanwhile determinants, commonly used adjusted
R², are used
to view the contribution of independent variables in explaining the
dependent
variable. The range of R² is from lowest value of 0 to highest
value (0 <R² < 1).
1. If R² = 0, it indicates that X explained 0% of variability in
Y.
46
2. If R² = 1, it indicates that each point in the sample were on
the regression line
(all errors are 0). Or in the other words, 100% of the variability
in Y could be
explained by regression equation.
3. In developing regression model, a good model will have R² value
close to 1.
When the number of independent variable is less than two, it is
used R², while
when the independent are more than two, then it uses adjusted R².
However, as it
is suggested by statistician, it is better to use adjusted R² to
consider both of the
number of independent variables and sample size used (Berenson
& Krehbiel,
2009). In this research, since there are more than two independent
variables, the
value of adjusted R² is used.
2. F-Test
F-Test is used to determine whether all independent variables,
which are used
together, have significant impact towards the dependent variable.
This test will
generate two possibilities outcome:
F < F table, Ho is accepted. Means that all independent
variables together are not
significantly influence the dependent variable
F > F table, Ho is rejected. Means that all independent
variables together are
significantly influence the dependent variable.
Another way to done this test is by observing significant values of
F with
significant level. This research is using 5% significant level or
0.05 significant
value. There will be two possibilities outcome, which are:
1. Significant F < 0.05, Ho is rejected. Means that all
independent variables
together are significantly influence the dependent variable
2. Significant F > 0.05, Ho is accepted. Means that all
independent variables
together are not significantly influence the dependent
variable.
3. T-Test
T-Test determines whether each independent variable significantly
affects the
dependent variable by comparing the value of t with t table. This
test will
generate two possibilities outcome:
1. t < t table, Ho is accepted. Means that the independent
variables have no
significant influence towards the dependent variable
2. t > t table, Ho is rejected. Means that the independent
variables has
significant influence towards the dependent variable
Another way to done this test is by observing significant values of
t with α
significant level. This research is using 5% significant level or
0.05 significant
values. There will be two possibilities outcome, which are:
1. Significant t < 0.05, Ho is rejected. Means that the
independent variables
have significant influence towards the dependent variable
2. Significant t > 0.05, Ho is accepted. Means that the
independent variables
have no significant influence towards the dependent variable.
48
1. PT. Ace Hardware Tbk
Ace Hardware was founded in 1924 by a small group of Chicago
hardware store
owners. Ace changed the retailed landscape by allowing individual
stores to
purchase merchandise in bulk to save money and buy at the lowest
possible price.
In 1928, Ace stores are officially incorporated, ensuring for the
founders right to
purchase, sell and even manufacture hardware. By year-end, 11
retailers are
joined the fledging company and its officially named Ace Stores,
Inc. After that,
PT. Ace Hardware in Indonesia was established in 1995 as a
subsidiary company
of PT. Kawan Lama Sejahtera, it is become #1 commercial and
industrial
supplies company in Indonesia. PT. Ace Hardware Indonesia Tbk, is
the master
franchise/license holder of ACE Hardware brand in the country,
appointed by
ACE Hardware Corporation, USA.
2. PT. Jasuindo Tiga Perkasa Tbk
The company was established on July 10, 1991, in Sidoarjo, East
Java, as PT
Jasuindo Tiga Perkasa. At first, the business scope was only
general printing,
especially the printing of business documents. On April 16, 2002,
PT Jasuindo
Tiga Perkasa became a public company that changed its name to PT
Jasuindo
Tiga Perkasa, Tbk. Its shares are listed in the Jakarta Stock
Exchange under the
code JTPE. PT Jasuindo Tiga Perkasa, Tbk. currently has three
plants in
operation: the security document plant, plant producing Visa card,
Master Card,
and other security cards, and business document plant. They are
modern, set in
49
beautiful landscapes and outfitted with the latest system and
equipment to support
the company’s performance.
PT. Hexindo Adiperkasa was established in November 28 th
, 1988. PT. Hexindo
Adiperkasa continued to success as the leading distributor of heavy
equipment in
Indonesia. Mining projects provides the great prospect for the
company known as
the master of the giant of heavy equipment. The line of business of
the company
is sales of heavy equipment, parts support, and service support and
full
maintenance contract remanufacturing. The vision of the company is
emerging as
a leader in Indonesian heavy machineries industry, having
world-class quality of
service for the ultimate satisfaction of stake holders. The mission
of the company
are to become the most reliable partner in heavy machineries
procurements,
having the expertise in providing the best solutions for products
and services, to
continuously improve productivity and performance of employees in a
more
conducive work environment, all at once supporting them in
achieving
prosperity, to strengthen the presence in global community by
contributing to
welfare of the society and the nation and to secure financial
reward and
continuous growth to shareholders.
PT Indocement Tunggal Prakarsa Tbk. ("Indocement") is one of
Indonesia's
major producers of quality cement and specialty cement products
marketed under
the brand name "Tiga Roda". Indocement also owns several
subsidiaries that
produce Ready-Mix Concrete (RMC), as well as manages aggregates and
trass
mining. Established on 1985, the Company was formed as a merger of
six cement
companies, which at the time owned eight plants. The first plant
officially
operated in 4 August 1975. Indocement continues to increase the
number of
plants, which now reached 12. Most of the plants are located in
Java. Nine plants
50
are located in Citeureup Factory, Bogor, West Java, and has become
one of the
world’s largest cement factories. Two plants are located in
Palimanan Factory,
Cirebon, West Java, and one other plant is located in Tarjun
Factory, Kotabaru,
South Kalimantan.
PT. Kalbe Farma Tbk was founded in September 10 th
1966 by 6 six brothers,
Khouw Tjoen Lip, Lip Khouw Hiang, Khouw Lip Swan, Boenjamin
Setiawan,
Maria Karmila, F. Bing Aryanto. Kalbe Farma has considerably
evolved from its
humble beginnings as a pharmacy business in the garage of the home
run
founders in North Jakarta. PT Kalbe Farma Tbk is an Indonesia-based
company
primarily engaged in manufacturing health and nutritional as well
as
pharmaceutical products. Its business is classified into four
segments:
prescription drugs, health products, nutritional products as well
as distribution
and logistics. Its prescription drugs segment manufactures
unbranded generic,
branded generic and patented drugs. Its health products segment
offers over-the-
counter (OTC) therapeutic drugs, consumer health products as well
as energy and
health drinks; some major brands under the segment are Woods,
Procold, Extra
Joss and Hydro Coco. Its nutritional products segment manufactures
a range of
products for infants, toddlers, children, teenagers, adults,
expectant and lactating
mothers as well as elderly; some of major brands under the segment
are
Prenagen, Milna, Diabetasol and Entrasol. The distribution and
logistics segment
is operated through its subsidiary, PT Enseval Putera Megatrading
Tbk.
6. PT. Semen Indonesia Tbk
The Company inaugurated in Gresik on December 7 Agustus1957 by the
first
President with an installed capacity of 250,000 tons of cement per
year, and
installed capacity in 2013 reach 30 million tons/year. On July 8,
1991 the
51
Company's share listed on the Jakarta Stock Exchange and Surabaya
Stock
Exchange (now Indonesia Stock Exchange) and is the first
state-owned
companies to go public by selling 40 million shares to the public.
The
composition of the shareholders at the time: State of RI 73% and
27% people. In
September 1995, the Company made a Rights Issue I (Right Issue I),
which alter
the composition of share ownership to the State of RI 65% and 35%
people. On
June 15 September 1995 by PT Semen Gresik consolidate with PT
Semen
Padang and PT Semen Tonasa. Total installed capacity of the Company
at the
time of 8.5 million tons of cement per year.
7. PT. Arwana Citramulia Tbk
PT Arwana Citramulia Tbk (Arwana) is a public company listed on the
main
board of Indonesian Stock Exchange (IDX) and traded under "ARNA"
stock
code. The Company is dedicated to producing low cost ceramic tiles
to serve
medium-low segment market nationwide. The products are sold under
"Arwana
Ceramic Tiles" brand, a brand name that signifying quality product
with
competitive pricing. In 2011 a brand new ceramic tiles with better
quality,
namely "UNO," was introduced to capture the medium-high market
segment.
Since its initial operation in 1995, Arwana has remained faithful
in its core
business based on its competence to produce quality products with
creative
designs. A wide variety of beautiful product-mix is offered
including Embossed,
Marble, Plain Color, Granity, Strata, Rustic, Fancy Wood and Fancy
Decorative.
The company’s vision is conceptualized due to the ideal desire
which is strive for
by the company founder, and underlying the vision is the commitment
to the
society. “To be the best company” is not only from business point
of view, but
also including social responsibility in the capacity of a company
whose existence
is deemed necessary and that is reliable within its stakeholders
and society at
large. Our operational system is inspired by the spirit of
creativity and gives
priority to innovative way of thinking and practices. Creativity
and innovation
52
approach in order to enhance corporate value will be highly
appreciated by
business society and surrounding society.
8. PT. Indofood CBP Sukses Makmur Food Tbk
ICBP was established on September 2009, as a separate entity after
the internal
restructuring of the CBP Group of its parent company, Indofood,
which has been
listed on the IDX since 1994. ICBP itself was listed on the IDX on
October 7,
2010. The various business operations and product brands of ICBP
have been
long established, with many enjoying leading positions in their
respective market
segments. The vision of the company is the Leading Consumer Goods
Company.
The mission of the company is to continuously innovate, focusing on
Consumers’
needs, delivering great brands with unparalleled Performance, to
deliver quality
products which are loved by consumers, to continuously improve our
people,
processes and technologies, to contribute to the welfare of the
society and
environment in a sustainable manner, and to continuously improve
stakeholders’
value.
9. PT. Holcim Indonesia Tbk
Holcim is a pioneer and an innovator in Indonesia's fast-developing
cement
sector, as the market for homes, commercial buildings and
infrastructure expands.
We are the only provider of a fully integrated range of 10 cement
types, concrete
and aggregates. We are building a unique franchise, Solusi Rumah,
to deliver
complete, affordable housing solutions and upgrades, drawing on the
skills of
over 49,000 Holcim-trained masons, 437 franchisees as of 2013 and a
growing
telesales presence. The company operates three cement plants in
Narogong-West
Java, Cilacap-Central Java, Tuban 1-East Java and a grinding
facility in
Ciwandan-Banten with total capacity of 11 million tons of cement.
We operate
multiple concrete batching plants, two stone quarries and an
extensive logistics
network of warehouses and silos. In 2013, our Cilacap Cement Plant
was one of
only a few businesses in Indonesia to receive a Gold PROPER rating
from the
Ministry of Environment, the highest award in Indonesia for
environmental and
waste management and the fourth time the plant has achieved this
result. Our
Narogong Plant holds a Green PROPER rating for third time in a row.
The same
year, we have attained first place in the Green Industry Awards for
the fourth
year. We are also the only business to receive an Ozone Award
recognising our
ongoing work to safely dispose of ozone depleting substances. For
community
relations, Holcim programmes were recognised by corporate social
responsibility
awards from Minister for Cooperatives and Small and Medium
Enterprise and
local governments.
10. PT. Martina Berto Tbk
The company was founded in 1977 by Dr. HC. Martha Tilaar, (the
late) Pranata
Bernard, and Theresa Harsini Setiady. In 1981, the company
established the first
modern factory on Jl. Pulo Ayang No. 3, Pulogadung Industrial
Estate, which
manufactures cosmetics and herbal medicine with brand
"Sariayu-Martha Tilaar"
for the first time. In 1986, the Company established a second
modern factory on
Jl. Pulo Kambing, Pulogadung Industrial Estate ("Pulo Kambing
Factory"). Due
to the rapid sales growth, in 1995, the company transferred
production of herbs to
Gunung Putri, Bogor. While the Pulo Ayang factrory transferred to a
subsidiary
company, which is PT Cempaka Belkosindo Indah. It's manufactures
cosmetics
with the brand "Mirabella" and "Cempaka". In 2005, PT Cempaka
Belkosindo
Indah be merged with the company so that the brand "Mirabella" and
"Cempaka"
also combined with the production at Pulo Kambing factory.
Furthermore, Pulo
Ayang factory transferred and enable as a sales office aside to the
company's
Distribution Center, located on Jl. Pulo Ayang No. 24-25,
Pulogadung Industrial
Estate. In 1993, the company acquired PT Cedefindo, which the main
business
areas are Contract Manufacturing (Makloon) in cosmetic products, as
the
company's business expansion to upstream. Next, the company sells
assets of the
54
plant in Gunung Putri and then continue to run the plant herbal
medicine with the
rental agreement until the end of 2011.
4.2. Overview of Research Objective
Samples that used in this study are the Top 50 companies according
to Forbes
Magazine Indonesia in 2015 are always present financial statements
period 2008
to 2013 and present a complete ratio corresponding to the variable
to be research.
So that the amount of data used are 60 data, which are taken from
the 10
manufacture companies multiplied by 6 years (the number of research
period).
Financial ratios in this research are obtained from each company’s
annual report.
The maximum or minimum of profitability standard each independent
variable
are from Bank Indonesia’s standard.
4.3. Descriptive Data
Descriptive data is used to show the total of data used in this
research, and can
show the minimum, maximum, average value and standard deviation of
each
variable research include ROE, WCTA, DER, TAT, and NPM. The results
of
descriptive data can be seen in Table 4.1 as follows:
Table 4.1 Descriptive Statistics
55
Source: Output of SPSS
Based on Table 4.1 above shows that the total of data used in this
study were 360
samples of data.
The table shows that the average of Working Capital to Total Assets
(WCTA) is
0.2910% with the lowest data was -0.35% which is PT. Indofood CBP
Sukses
Makmur in 2009 and for the highest is PT. Ace Hardware in 2009 with
the
amount of 0.72%. The standard deviation of Working Capital to Total
Assets
(WCTA) has a lower amount than average value (mean) which the
amount of
standard deviation is 0.23234% while the amount of mean is 0.2910%.
It shows
the data used in this variable has a small distribution because the
standard
deviation value is lower than its average value (mean), so that the
deviation of
Working Capital to Total Assets (WCTA) variable can be said is
good.
The table shows that the average of Debt to Equity Ratio (DER) is
34.6688%
with the lowest data was 0.12% which is PT. Ace Hardware in 2009
and for the
highest is PT. Martina Berto in 2008 with the amount of 206.80%.
The standard
deviation of Debt to Equity Ratio (DER) has a higher amount than
average value
(mean) which the amount of standard deviation is 58.03775% while
the amount
of mean is 34.6688%. It shows the data used in this var