The Impact of Debt Management on Profitability: A Study of Automotive Companies Listed on the Indonesia Stock Exchange
Keywords:
Debt, Profitability, Automotive and Simple Regression Analysis.Abstract
Debt is all financial obligations of the company to other parties that have not been fulfilled, both short-term debt and long-term debt. Debt can affect the company's ROE. Return on equity (ROE) shows the company's ability to generate profits from the equity used. This ratio is obtained from profit before tax divided by total equity. The purpose of this study is to determine and empirically prove the effect of debt on ROE in Automotive companies on the Indonesia Stock Exchange. In this study, an associative research approach is used, which is a study to determine the effect between independent variables and their dependent variables. The sample of this study was 12 automotive companies. To prove the hypothesis proposed in this study, a simple linear regression statistical tool was used with partial testing (t-test). Based on the results of the hypothesis test, it can be proven that debt has an effect on ROE. The R-square value of 0.129 proves that the contribution of the independent variable (debt) in explaining its effect on the dependent variable ROE (Return On Equity) is 12.9% while the rest (100 - 12.9 = 87.1%) is influenced by other factors such as capital structure, working capital, sales and so on.
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