Article Type: Research Article Article Citation: Seniwati Sembiring, Syafrida Damanik, M.
Umar Maya Putra, and Maliyah. (2020). FACTORS THAT INFLUENCE THE LEVEL OF
PROFITABILITY MANAGERIAL IN MEDAN. International Journal of Research
-GRANTHAALAYAH, 8(9), 209-214. https://doi.org/10.29121/granthaalayah.v8.i9.2020.1413 Received Date: 15 September 2020 Accepted Date: 30 September 2020 Keywords: Managerial Assert Profitability Medan The purpose of this study was to determine the effect of the Current Ratio (CR), Debt to Equity Ratio (DER) and Total Assert Turn Over (TATO) on profitability Managerial in Return on Assert (ROA) for the period 2008-2017. The sample of financial statements that were studied for 10 years at PT. Ira Widya Utama as one of the biggest company In Medan. The data used is secondary data. This study analyzes the relationship among them. The statistical method used is multiple linear regression using the classic assumption test first. It indicates that partially the CR has a negative significant effect, DER has a positive and insignificant effect, TATO has a positive and significant effect on ROA. simultaneously, CR, DER and TATO have a positive and significant on ROA.
1. INTRODUCTIONThe company is one form of organization that generally has a specific
purpose to be achieved in its business is to meet the interests of the
stakeholders. In addition the company's goals include increasing the value of
the company, satisfying the needs of the community and to obtain profits . The company's
performance will determine the achievement of these objectives and will be the
basis for returning decisions for internal and external parties. ROA
makes the extent to which investments that have been invested are able to
provide returns as expected and the investment is actually the same as the
company's assets that are invested or placed. It is one indicator to measure a
company's financial performance and is a profitability ratio that is used to
measure the effectiveness of a company in generating profits by utilizing the
total assets it has. ROA is the ratio between Net Income After Tax (NIAT) to
total assets [1], [2], [3]. The CRis the ratio used to measure the company's
ability to meet term obligations in short which is due soon by using the total
current assets available. It is a widely used measurement to evaluate company
liquidity and ability to pay short-term debt. High CR shows that the better the
company is in managing its current assets so that it can meet the company's
ability to meet its obligations [4], [5], [6]. The lower value of the CR indicates the company's
inability to generate profits due to the limited it that can be used in the
company's operations because most of it that will be used to meet short-term
obligations, so this can affect the profitability of the company. DER is a ratio used to calculate the extent to which owner's equity can
cover debt to outside parties. It is a ratio that measures the extent to which
a company is able to meet its long-term obligations. It is a comparison between
funds originating from owners and funds originating from creditors. It is a ratio used to measure the ratio
between total debt to total equity. Debt to equity ratio is a ratio that shows
the ratio between debt and own capital [7], [8], [9]. High and low DER will affect the level of ROA achievement achieved by
the company. If the costs incurred by the loan are smaller than the cost of
capital alone, then the source of funds derived from loans or debt will be more
effective in generating profits, and vice versa. Companies with growing profits
will strengthen the relationship between DER and profitability, which is where
its increases along with low it. The higher of DER, The more efficient a
company is managing assets to generate profits. TATO is a ratio that measures the extent to which a company's effectiveness
in managing its assets in generating sales, or can also be said, to compare the
acquisition of sales with assets owned. The choice of this ratio is because the
effectiveness of the company in generating sales using its assets will be
demonstrated through its calculations. The amount of its value will show assets
that are faster in turning in generating sales to make a profit. Sales volume
can be increased by the same amount of assets if the total asset turnover is
enlarged or increased. The company's sales activities by utilizing its total assets are
reflected through it). The amount of assets used in the company's operations
will affect the level of sales, then the level of sales will affect the amount
of profit. So it can be concluded that TATO affects profitability where the
higher of TATO the higher the ROA and vice versa. The reason the authors conducted research at PT. Ira Widya Utama Medan
because the authors found problems related to profitability that is not stable
from year to year. So the authors are interested in conducting further research
related to CR, DER, TATO to ROA in the last 10 years. 2. MATERIALS AND METHODS2.1.
CURRENT
RATIO (CR)
It is the ratio commonly used to measure the ability of
companies to meet short-term liabilities that will mature in one year. This
ratio calculation aims to find out how far the actual amount of the company's
current assets can guarantee debt from short-term creditors [10]. It is too high is
also considered not good because of the many funds that are unemployed. High CR
may indicate the existence of excessive cash compared to the level of need or
the presence of elements of it that is low in liquidity (such as excess
inventory) Vice versa, low CR means there is a liquidity problem. Low It is
relatively riskier, but it shows that management has operated its CR effectively [11]. 2.2. DEBT TO EQUITY RATIO (DER)
It ratio is a ratio used to calculate the extent to which
owner's equity can cover debt to outside parties. Meanwhile. It is a ratio that
measures the extent to which a company is able to meet its long-term
obligations. It is a comparison between funds originating from owners and
funds originating from creditors [12] 2.3.
TOTAL ASERT
TURN OVER (TATO)
It is a ratio
that shows the effectiveness of companies in using overall assets to create
sales and get profits. It is a ratio used to measure the effectiveness of the
total assets of the company in generating sales [13]. 2.4.
RETURN ON ASSERT
(ROA)
It involves
elements of net income and TATO where net income is divided by total assets
managerial or total assets of the company to make a good concept management
system in multiplied by 100% forming it [13]. 3. RESULTS AND DISCUSSIONSThis research uses causal design that
analyzes the causal relationship among all varibales. The population and sample in
this study is the financial statements owned by PT. Ira Widya Utama Medan,
which is engaged in General Contractors and plantations through the balance
sheet and income statement from 2008-2017. The type of data
used in this study is quantitative data, where quantitative data, which is data
that is a collection of numbers resulting from observations. Data sources used
in this study are secondary data obtained from various sources, in the form of
financial reports obtained directly from PT. Ira Widya Utama Medan, consisting
of balance sheet and income statement as the secondary data in the form of
documentation and annual reports such as the balance sheet and income statement
from 2008 to 2017. Before continuing the
regression, The classical assumption is used to to see the feasibility of the
model using Heteroscedasticity, Multicollinearity, Normality. The Research Data
Analysis Model is a multiple linear regression analysis used with the intention
to determine the effect of the current ratio, debt to equity ratio, and total
asset turnover on profitability, whether each variable is positively or
negatively related the T-Test and F-Test as well as R2 using spss
software with the pattern Y = a + b1 X1 + b2 X2 + b3
X3 + e It can be
explained with : Profitability = a + b1 Current Ratio + b2 Debt to equity ratio+
b3 Total Asset Turnover + e 4.
RESULT
AND DISCUSSION
4.1.
RESULT
This study
informs how the influence of CR, DER and TATO on ROA. The object of the company
used in this study is the annual financial statements for the period 2008-2017
at PT. Ira Widya Utama Medan is a company engaged in the field of general
contractor and it is obtained directly
from the manager in the financial department. The descriptive
statistical results before the transformation that the number of observations
is 40 which is quarterly data for 10 years of financial statements for the
period 2008-2017. 1)
CR It has a minimum
value of 0.29, a maximum value of 3.66 with an average value (mean) of 1.5370
and a Standard Deviation of 0.76029. 2)
DER It has a minimum
value of 0.02, a maximum value of 2.13 with an average value (mean) of 0.8368
and a Standard Deviation of 0.50455. 3)
TATO It Turnover has a
minimum value of 0,0003, a maximum value of 18.00 with an average value (mean)
of 0.5891 and a Standard Deviation of 2.82912. 4)
ROA It has a minimum value of 0.18, a maximum value
of 15.44 with a mean value of 4.9580 and a standard deviation of 3.89994. By processing
data using with SPSS V. 23 program, It can be concluded that the impact of
using regression analysis, is to conclude whether the rise and fall of
variables can be done through raising and decrease them, The form of the
equation of this multiple linear regression model is: Profitability = 13,123 - 6,051CR + 1,492DER + 7,344TATO + e The equation of
the multiple linear regression model for ROA can transfered as follows: 1)
In
this regression model, a constant value of 13,123 (positive value) means that
if the CR, DER and TATO the value is 0,
the Profitability ROA value is 13.23% 2)
CR
regression coefficient value of -6,051 (negative value) in this study can be
interpreted that ithas a significant negative effect on ROA. This shows that
the increased CR has no impact on the ROA. 3)
DER regression coefficient value of 1.492
(positive value) in this study can be interpreted that the DER variable has a
positive but not significant effect on ROA. This shows that the better the
company in fulfilling its obligations in a certain time with the ratio of
equity owned for one year. 4)
TATO
regression coefficient value of 7,344 (positive value) in this study can be
interpreted that it has a significant positive effect on ROA. This shows that
how much the company is able to increase its sales in using assets to make a
profit within a predetermined target within one year. It shows that
there is a significant correlation or relationship between the CR, DER and
TATO as an independent variable and ROA
as the dependent variable with the ROA analysis. This can be seen from the
Adjusted R2 value obtained 0.680 which means 68.0% thus the variable
current ratio, debt to equity ratio and total asset turnover simultaneously
have a strong level so that they can provide an explanation on the variable
ROA. And the remaining 32.0% is explained by other factors not included in this
research model. 4.2.
DISCUSSION
4.2.1. EFFECT OF CR ON ROA
IN PT. IRA WIDYA UTAMA MEDAN From the theory
put forward by the experts above it can be concluded that CR is a ratio that
compares current assets with it. It provides information about the ability of
CR to cover current debts. The theory put
forward by the experts above is not in accordance with the phenomena that occur
at PT. Ira Widya Utama Medan, where each year It owned by PT. Ira Widya Utama
Medan has an average value of 1.05 times, which means the company has long-term
debt and short-term debt which is quite large so that the obligation of the
company to fulfill its obligations in covering or paying off these debts before
maturity, from an agreement determined both from the creditors and the banks
that lend funds as the idea [1], [2], [3], [10], [11]. Although PT.Ira
Widya Utama Medan has a low profitability (ROA) due to the assets owned by the
company began to decrease after the change of owner, the PT. Ira Widya Utama
Medan took the initiative to merge with other companies to obtain additional
funds as initial capital and to be able to pay off these debts before maturity,
so that the capital turnover from the loan funds was rotated to renovate
property owned by PT. Ira Widya Utama Medan and also to add company assets by
buying new construction equipment and also expanding such as oil palm, sugar
cane, and other plants that also provide benefits or profits for the company to
survive in the face of economic globalization that is in Indonesia one of which
is the decline in the rupiah in recent years. The results of
the study are not in accordance with the theory put forward by experts and
previous researchers, where research on the effect of current ratio on
profitability (ROA). Partially CR has a significant negative effect on ROA and
the authors conclude that the company's lack of ability to cover long-term debt
obligations and short-term debt to increase the return on assets owned by PT.
Ira Widya Utama Medan. 4.2.2. EFFECT OF DER ON ROA
IN PT. IRA WIDYA UTAMA MEDAN From the theory
put forward by the experts above it can be concluded that the DER is a
financial ratio that shows the relative proportion between Equity and Debt used
to finance company assets. High and low DER will affect the level of ROA
achievement achieved by the company. If the costs incurred by the loan are smaller
than the cost of capital alone, then the source of funds derived from loans or
debt will be more effective in generating profits. The theory put
forward by the experts above is not in accordance with the phenomena that occur
at PT. Ira Widya Utama Medan, DER is a ratio that shows the ratio between total
liabilities and total equity in equity funding. PT. Ira Widya Utama Medan has a
high DER so that the profits generated by the company are getting lower, this
shows the proportion of capital owned is smaller than the company's liabilities
or high dependency from outside parties. PT. Ira Widya Utama Medan has too many
obligations so that it is difficult to get additional funds from outside
parties, therefore the company is innovating and improving its assets in order
to be able to increase investor interest in investing in PT. Ira Widya Utama
Medan as the idea [4], [5], [6], [12]. In general, debt
carries a risk because every debt, will cause a permanent relationship for the
company, in the form of an obligation to pay interest expenses and installments
periodically. therefore the company must be able to use the debt effectively
and asfully as possible because it will be able to provide benefits to the
company. This can be related to the amount of debt to equity ratio, because the
lower the ratio is a profitable signal for investors because it can prove that
if the company in obtaining its funding utilizes more capital than debt. The results of
this study are not in accordance with the theory put forward by experts and
previous researchers, where research on the effect of DER on profitability
(ROA). Partially the DER has no
significant positive effect on ROA. The authors conclude that the smaller the
debt to equity ratio and the company's debt and the greater the equity owned
will attract investors to invest their shares, because this is wrong. one
factor is the right decision in investment and the use and use of it to
generate profits for PT. Ira Widya Utama Medan. 4.2.3. EFFECT OF TATO ON ROA
AT PT. IRA WIDYA UTAMA MEDAN From the theory
put forward by the experts above it can be concluded that TATO is a ratio that
measures the extent to which the effectiveness of the company in managing its
assets in generating sales, the amount of TATO value will show assets that are
faster in turning in generating sales for profit. Sales volume can be increased
by the same amount of assets if the total asset turnover is enlarged or
increased. The theory put
forward by the experts above is in accordance with the phenomena that occur at
PT. Ira Widya Utama Medan, total asset turnover is part of one activity ratio
that shows how effectively the company uses its assets to create revenue from
sales, where the company's ability to use total asset turnover in managing all
assets owned if the company's effectiveness uses assets To obtain a high level
of sales, it is expected that the company's profitability will increase, thereby
increasing profit growth significantly. PT. Ira Widya
Utama Medan is able to manage all its assets well so as to increase sales
results in the last 5 years the company is able to optimize the total assets
owned. At this time PT. Ira Widya Utama Medan again tried to maximize the total
assets owned to increase the profitability of the company by purchasing several
assets that were important to the company such as dozers, trucks (pickups),
computer units, cars and also sugarcane and corn grinding machines. This was
done to facilitate the company in managing plantations such as oil palm, sugar
cane, corn and several other plants. The results of
the study are in accordance with the theory put forward by experts and previous
researchers, where research on the effect of total asset turnover on
profitability (ROA). As partially, It
has a significant positive effect on ROA the authors conclude that the
company's ability to manage all assets owned to increase sales of production,
in order to achieve the predetermined target of obtaining the highest possible
profit as the idea [7], [8], [9], [13]. 4.2.4. EFFECT OF CR, DER AND TATO ON ROA IN PT.
IRA WIDYA UTAMA MEDAN It has conducted
research on the effect of the level of liquidity, solvency, activity on
profitability in manufacturing companies listed on the Indonesian Exchange that
the current ratio, debt to equity ratio and total asset turnover together
affect positive and significant towards profitability as the idea [13]. 5. CONCLUSIONS AND RECOMMENDATIONS5.1.
CONCLUSION
This study
examines whether CR, DER and TATO has an
influence on profitability using Return On Assets (ROA) at PT. Ira Widya Utama
Medan from the annual financial statement data in the form that can be drawn,
such as : 1)
From
the results of simultaneous regression testing, there is a significant positive
effect between the variable CR, DER and TATO
on the variable ROA PT. Ira Widya Utama Medan. 2)
CR
test results partially have a significant negative effect on ROA at PT. Ira
Widya Utama Medan 3)
DER
has partially an insignificant positive effect on ROA at PT. Ira Widya Utama
Medan. 4)
TATO
has partially a significant positive effect on ROA at PT. Ira Widya Utama
Medan. 5.2.
RECOMMENDATION
Based on the
results of this study, researchers tried to provide good advice and input for
the company PT. Ira Widya Utama Medan and could be a reference for further
researchers. 1)
Increase
the company's activities so that the assets owned by the company can spin
faster than in previous years and not more than 1 year. It is recommended that
assets owned by the company can be more productive so as to increase company
sales. 2)
Maintaining
the company's solvency position in the
amount of debt owned by the company is not too large and also
maintaining that the company's working capital continues to increase and
increase profits received by the company so that the capital owned by the
company can guarantee the company's debt. 3)
It is
better for PT. Ira Widya Utama Medan to sell the company's shares or merge with
other companies in order to increase capital for management funds as well as
the company's needs in order to increase revenue and in the future be able to
increase the company's profitability better. 4) For further research, it is expected to increase the variables contained in the liquidity, solvency and activities that can affect the profitability of the company, as well as increase the number of samples and increase the research period so that the results of the data obtained are more accurate and valid. SOURCES OF FUNDINGThis research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors. CONFLICT OF INTERESTThe author have declared that no competing interests exist. ACKNOWLEDGMENTThe authors give the
special appreciation for the chief of research Universitas Al Azhar, Medan,
Sumatera Utara. REFERENCES
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Irham. 2012. Analisis Kinerja Keuangan. Bandung: Alfabeta, 2012.
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