The Effect of Current Ratio, Debt to Equity Ratio, and Return on Equity on Profit Growth in LQ-45 Index Companies

Abstract

This research sought to examine the impact of Financial Ratios utilizing Current Ratio (CR), Debt to Equity Ratio (DER), and Return on Equity (ROE) on Profit Growth across LQ-45 Index Companies. In this work, the Saturated Sample approach was used for sampling. Normality test, autocorrelation test, multicollinearity test, and heteroscedasticity test are used for analysis. Multiple linear regression, correlation coefficient (R test), coefficient of determination (R2), simultaneous effect test (F), and partial effect test (P) are used as statistical tests (t). The results of the normality test indicate that all sampled data have a normal distribution with asymptotes. Significance (2-tailed): 0.0934 > 0.05. Simultaneous test results using the F test indicate that the three independent variables, namely CR, DER, and ROE have no significant effect on the dependent variable (profit growth) as evidenced by the calculated F value of 3.328 and sig. 0.026 which is less than 0.05, while the partial test using the t-test indicates that the independent variable, namely CR does not have a significant effect on profit growth, whereas DER does. The results of the R test (correlation) for the three variables are 0.713. The (R test) CR values are -0.172, DER is 0.095, and ROE is -0.333. R Square has a value of 0.159 for the results of the coefficient of determination (R2) This demonstrates that the simultaneous impact of variables X1, X2, and X3 on variable Y is 15.9 percent profit growth, whereas the remaining 84.1 percent profit growth may be affected by other factors not investigated in this research.