THE EFFECT OF FINANCIAL RATIO TOWARD STOCK PRICE ON INDONESIA’S RETAIL BUSINESS

Abstract

Since last decade, retail company keep doubling their outlets to increase the chance to gain more profit. Even during pandemic Covid-19, retail sector contribute around 12.69% to Indonesia's GDP. The factors that influence retail companies to survive during the pandemic is because of expansion into digital base transaction, which help customer to purchase item without coming to the shop. With that the company maintain their profitability and aside from that the companies also supported by funding from the capital market. This study aims to prove the effect of financial ratio in term of current ratio (CR), debt to equity ratio (DER), total asset turnover (TATO), and earning per share (EPS) and their relations toward company’s stock price. Those four independent variables tested partially and simultaneously to prove their influence on stock price of retail sector companies that listed on Indonesia Stock Exchange (IDX). There are in total 54 observation data gathered from 6 retail company during period of time 2015 – 2023. This study uses qualitative research method and the data examined using descriptive analysis, classical assumption test, and multiple linear regression test with technique Random Effect Model (REM). The significant value used is 0.1 or 10%, with this the outcome from the research reveal current asset and debt to equity ratio both have negative insignificant effect. Meanwhile total asset turnover and earning per shares have significant positive influence toward the independent variable. The result of the simultaneous testing reveal the F-statistic 0.00011 and R-squared is 38.47% where the other 61.53% is influencing by other variable that not tested in this study.