THE FINANCIAL RATIO ANALYSIS TOWARDS FINANCIAL PERFORMANCE OF COMMERCIAL BANK IN INDONESIA

Abstract

This research aimed to analyze the effect of financial ratio towards financial performance of commercial banks in Indonesia. There are six variables used in this research consists of dependent and independent variable. Dependent variable is financial performance measured by return on asset. Independent variables are capital adequacy ratio, non-performing loan, net interest margin, operating expense to operating income, and loan to deposit ratio with examined by descriptive statistical analysis, classical assumption test, multiple linear regression, and hypothesis testing. This research adapt quantitative research has 75 observations data period 2014-2018. The purposive sampling method and panel data are being used for selecting the observation data, where the data are collected from Indonesia Stock Exchange. The result determined that capital adequacy ratio and net interest margin are positive significant, non-performing loan and operating expense to operating income are negative significant, and loan to deposit ratio is negative insignificant towards financial performance of commercial banks in Indonesia.