Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange
This study investigates the impact of working capital, liquidity, solvency, and activity on profitability, with a specific focus on pharmaceutical companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023—a sector chosen due to its distinctive financial dynamics, including high resea...
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| Format: | Article |
| Language: | English |
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Universitas KH Abdul Chalim, Prodi Ekonomi Syariah
2025-04-01
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| Series: | Indonesian Interdisciplinary Journal of Sharia Economics |
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| Online Access: | https://e-journal.uac.ac.id/index.php/iijse/article/view/6883 |
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| author | Alqoria Nur Azizah Zulfa Irawati |
| author_facet | Alqoria Nur Azizah Zulfa Irawati |
| author_sort | Alqoria Nur Azizah |
| collection | DOAJ |
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This study investigates the impact of working capital, liquidity, solvency, and activity on profitability, with a specific focus on pharmaceutical companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023—a sector chosen due to its distinctive financial dynamics, including high research and development expenditures, prolonged product cycles, and heightened relevance in the post-pandemic period. Utilizing a quantitative approach with panel data regression, the study incorporates model selection tests (Chow, Hausman, and Lagrange Multiplier) and classical assumption tests to validate the model, addressing potential issues such as multicollinearity, heteroscedasticity, and autocorrelation. The analysis is based on secondary data from a defined sample of pharmaceutical firms, with operationalization of variables such as “activity” measured through asset turnover ratios. Findings reveal that while liquidity exerts a significant positive influence on profitability, suggesting the importance of effective cash management and short-term asset optimization, working capital and solvency display negative yet statistically insignificant effects, possibly reflecting the sector's dependence on long-term investments and leveraged capital structures. The study underscores the need for pharmaceutical firms to balance liquidity with strategic allocation of capital in light of industry-specific constraints.
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| format | Article |
| id | doaj-art-4ff6a84f7ffa4ae0a2593afe012d8757 |
| institution | OA Journals |
| issn | 2621-606X |
| language | English |
| publishDate | 2025-04-01 |
| publisher | Universitas KH Abdul Chalim, Prodi Ekonomi Syariah |
| record_format | Article |
| series | Indonesian Interdisciplinary Journal of Sharia Economics |
| spelling | doaj-art-4ff6a84f7ffa4ae0a2593afe012d87572025-08-20T01:55:39ZengUniversitas KH Abdul Chalim, Prodi Ekonomi SyariahIndonesian Interdisciplinary Journal of Sharia Economics2621-606X2025-04-018210.31538/iijse.v8i2.6883Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock ExchangeAlqoria Nur Azizah0Zulfa Irawati1Universitas Muhammadiyah Surakarta, Surakarta, IndonesiaUniversitas Muhammadiyah Surakarta, Surakarta, Indonesia This study investigates the impact of working capital, liquidity, solvency, and activity on profitability, with a specific focus on pharmaceutical companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023—a sector chosen due to its distinctive financial dynamics, including high research and development expenditures, prolonged product cycles, and heightened relevance in the post-pandemic period. Utilizing a quantitative approach with panel data regression, the study incorporates model selection tests (Chow, Hausman, and Lagrange Multiplier) and classical assumption tests to validate the model, addressing potential issues such as multicollinearity, heteroscedasticity, and autocorrelation. The analysis is based on secondary data from a defined sample of pharmaceutical firms, with operationalization of variables such as “activity” measured through asset turnover ratios. Findings reveal that while liquidity exerts a significant positive influence on profitability, suggesting the importance of effective cash management and short-term asset optimization, working capital and solvency display negative yet statistically insignificant effects, possibly reflecting the sector's dependence on long-term investments and leveraged capital structures. The study underscores the need for pharmaceutical firms to balance liquidity with strategic allocation of capital in light of industry-specific constraints. https://e-journal.uac.ac.id/index.php/iijse/article/view/6883ActivityLiquidityProfitabilitySolvencyWorking Capital |
| spellingShingle | Alqoria Nur Azizah Zulfa Irawati Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange Indonesian Interdisciplinary Journal of Sharia Economics Activity Liquidity Profitability Solvency Working Capital |
| title | Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange |
| title_full | Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange |
| title_fullStr | Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange |
| title_full_unstemmed | Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange |
| title_short | Analysis of the Effect of Working Capital, Liquidity, Solvency, and Activity on Profitability in Pharmaceutical Sector Companies Listed on the Indonesian Stock Exchange |
| title_sort | analysis of the effect of working capital liquidity solvency and activity on profitability in pharmaceutical sector companies listed on the indonesian stock exchange |
| topic | Activity Liquidity Profitability Solvency Working Capital |
| url | https://e-journal.uac.ac.id/index.php/iijse/article/view/6883 |
| work_keys_str_mv | AT alqorianurazizah analysisoftheeffectofworkingcapitalliquiditysolvencyandactivityonprofitabilityinpharmaceuticalsectorcompanieslistedontheindonesianstockexchange AT zulfairawati analysisoftheeffectofworkingcapitalliquiditysolvencyandactivityonprofitabilityinpharmaceuticalsectorcompanieslistedontheindonesianstockexchange |