Determinants of Profitability: Evidence of the Pharmaceutical Industry in Indonesia

Abstract

Endri Endri, Lisdawati, Desi Susanti, Luqman Hakim, Sugianto Sugianto.

The study aims to estimate and analyze the impact of financial performance on the profitability of pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange (IDX) for the 2014-2018 period. Financial performance is measured by current ratio (CR), fixed asset turnover (FATO), total asset turnover (TATO), and debt to equity ratio (DER), while profitability is measured by return on assets (ROA). The method of data analysis uses a multiple linear regression model of 9 pharmaceutical sub-sector companies selected based on criteria determined in the purposive sampling technique. Based on the results of the study it can be concluded that partially CR, TATO and DER have a negative effect on ROA, while FATO has a positive effect. Simultaneous testing shows that all financial ratios consisting of; CR, FATO, TATO, and DER influence ROA. The results of the research have the implication that in order to improve the performance of the profitability of pharmaceutical companies, the financial manager increases the efficiency of the use of fixed assets, reduces the use of long-term debt, and does not hold current assets for too long because it has an impact on company profits