THE ANALYSIS OF FINANCIAL RATIO IN PREDICTING THE GROWTH OF EARNINGS IN MANUFACTURING COMPANIES LISTED IN INDONESIA STOCK EXCHANGE 2005 - 2008

Abstract

The objective of this research is to examine the usefulness of Gross Profit Margin (GPM), Net Profit Margin (NPM), Operating Profit Margin (OPM), Return on Asset (ROA), Return on Equity (ROE), Inventory Turnover (IT), Total Asset Turnover (TAT), Current Ratio (CR), Debt to Equity (DTE), and Leverage Ratio (LR) in predicting the growth of earnings in manufacturing companies. The sampling technique used in this research used in this research is purposive sampling, with some criteria, those are: (1) manufacture company listed in ISX and still operating consistently during the research period; (2) the company does not exit (delisting) on the JSE during the study period; (3) during the period of research, firm earns positive profits; (4) company that has positive financial ratio. The result of this research shows that the data has fulfill the classical assumption, such as; no multicolinearity, no autocorrelation, no heteroscedasticity and distributed normally. From the bivariate test, found that only six ratios may entered into multivariate model, which are: Gross Profit Margin (GPM), Operating Profit Margin (OPM), Return on Equity (ROE), Inventory Turnover (IT), Total Asset Turnover (TAT), and Debt to Equity (DTE. Besides, from the regression analysis, it can be concluded, partially Inventory Turnover (IT), Total Asset Turnover (TAT), Return on Equity (ROE) and Operating Profit Margin (OPM) have a positive significant to profit growth of manufacture company. From the research also known that six variables (GPM, IT, TAT, ROE, DTE, and OPM) simultaneously have an influence in predicting the profit growth in manufacture company. The prediction percentage of those variables simultaneously is 38.7%