THE INFLUENCE OF WORKING CAPITAL, FIRM SIZE, DEBT RATIO AND FATA ON PROFITABILITY OF FMCG COMPANIES IN INDONESIA ( A CASE STUDY OF 9 FMCG COMPANIES LISTED IN INDONESIA STOCK EXCHANGE PERIOD 2007 – 2010)

Abstract

The objective of the research is to analyze the influence of working capital, firms size, debt ratio and FATA to profitability towards company specifically FMCG company in Indonesia. FMCG (Fast Moving Consumer Goods) Company is company which produce retail product with relatively short save life because high turn-over rate or the product deteriorates fast. The products also usually have relatively low price. FMCG companies’ growth in Indonesia keeps increasing from time to time. However, there are 9 companies which have instable profit either volatile or keep decreasing. Thus, Researcher would like to observe the relationship occurs both simultaneously and partially among the dependent and independent variables. The methodology used within the research is descriptive quantitative method, which involve calculation and description of the data obtained. The samples of the research are annual financial report of top 9 FMCG Companies in Indonesia which are listed in Indonesia Stock Exchange period 2007 – 2010. Multiple Regression method is chosen for data analysis (α =5%). There are several tests conducted to test all variables include: Normality Test and Hypotheses test. The result of the statistical treatments shows there is positive and negative significant relationship among working capital, debt ratio, firm size, and FATA to profitability. F-test significant result is 0.00a < 0.05 (less than α =5%). It means that there is simultaneous correlation of working capital, firm size, debt ratio and FATA to profitability. On the other hands, t-test result shows negative significant relationship between working capital on profitability (B = -0.002 and Sig 0.047 < 0.05), FATA on profitability (B= -1.257 and Sig 0.047 < 0.05), and Debt Ratio on Profitability (B =-0.973 and Sig 0.018 < 0.05). It means that if working capital, FATA or Debt Ratio value decrease, profitability will increase. On the other hands, the result of firm size showed positive significant correlation on profitability (B = 0.237 and Sig 0.003 < 0.05). It means that the profitability increase along with the size of firm. After conducting the research, it is suggested to company to maintain effective working capital. Working capital is measured by Cash Conversion Cycle. It is important to keep the Cash Conversion Cycle period to minimum to operate efficiently. Company could cut the operational cost by keeping Cash Conversion Cycle period to minimum which could result the enhancement of profitability.