THE EFFECTS OF FINANCIAL RATIO TOWARDS STOCK PRICE IN LQ45 COMPANIES LISTED IN INDONESIA STOCK EXCHANGE PERIOD 2010 - 2014

Abstract

This research focuses on analyzing the effects of financial ratio on stock price in LQ45 companies listed in Indonesia Stock Exchange from the year 2010 to 2014. Financial ratios used in this research include Current Ratio, Debt to Equity Ratio, Net Profit Margin, and Total Assets Turnover, in which they represent liquidity ratio, solvency ratio (leverage), profitability ratio, and activity ratio respectively. The stock price used in this research is closing price. This research uses 17 sample companies which are chosen by using purposive sampling method. This research uses secondary data, in which the data is taken from www.idx.co.id. This research uses multiple regression analysis. In order to have a good regression model, classical assumption test, including normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test, should also be done. Another test done in this test is hypothesis test, which includes coefficient determination, t-test, and F-test. By using Statistical Package for Social Science (SPSS) version 23, this research shows that Current Ratio (CR) and Net Profit Margin (NPM) does not give any significant influence on stock price, while Debt to Equity Ratio (DER) have negative and significant effects on stock price and Total Assets Turnover (TATO) have positive and significant effects on stock price. Simultaneously, Current Ratio, Debt to Equity Ratio, Net Profit Margin, and Total Assets Turnover have significant effects towards stock price. The coefficient determination of this research is 30.6%, which means that the financial ratios used can give sufficient information regarding stock price.