Maintaining operational smoothness

Oct 13, 2025 by leolavanderia.com.br 74 views

The Effect of Working Capital Funding on the Financial Performance of Companies in Various Industrial Sectors Listed on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is a vital platform for companies to raise capital and expand their business operations. However, managing working capital effectively is crucial for companies to achieve their financial performance targets. This study aims to investigate the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX. The study uses data from 10 companies listed on the IDX and employs descriptive analysis and multiple linear regression to analyze the data.

The Role of Working Capital

Working capital is a current asset used to run daily business operations. It is essential for companies to manage their working capital effectively to meet their short-term obligations, maintain operational smoothness, and develop their business. Working capital can come from internal sources, such as retained earnings, or external sources, such as bank loans and bond issuance. Optimal working capital helps companies to:

Meet short-term obligations: Payment of salaries, raw materials, and other bills can be met on time.
Maintaining operational smoothness: The company can continue to operate without obstacles because of sufficient working capital needs.
Developing a business: With adequate working capital, companies can expand, innovate, or make new investments.

Why is Working Capital Funding Important for Financial Performance?

Proper working capital funding can have a positive impact on the company's financial performance. Here are some explanations:

Improving profit statement: Adequate working capital allows companies to buy raw materials at lower prices because they can buy in large quantities. This can reduce production costs and increase profits.
Reducing the risk of failure: Availability of sufficient working capital can help companies pass through difficult times such as decreased demand or economic crisis.
Strengthening the negotiation position: Companies with strong working capital have a better bargaining position when negotiating with suppliers, customers, or financial institutions.

The Impact of Working Capital Funding on Financial Performance

The study uses data from 10 companies listed on the IDX and employs descriptive analysis and multiple linear regression to analyze the data. The results show that both long-term funding and current smooth liabilities affect the operating profit of the company sector of various industry in the IDX. Furthermore, partial analysis revealed that the two variables significantly affect the company's operating profit.

The coefficient of determination (R2) of 93.4% shows that long-term funding variables and current liabilities are able to explain 93.4% of the variations of operating profit companies in the IDX sector in the IDX. The remaining 6.6% is influenced by other independent variables that are not examined in this study.

Recommendations for Companies

The results of this study indicate that the importance of effective working capital management to improve the financial performance of the company of the various industrial sectors in the IDX. Here are some recommendations:

Analysis of Working Capital Needs: The company needs to regularly analyze the needs of working capital based on the operating cycle and its business strategy.
Choosing the right funding source: Choosing a funding source in accordance with the needs and profile of the company's risk is very important.
Managing cash flow efficiently: The company needs to implement a structured cash flow management system to maximize the use of working capital.

Conclusion

Working capital funding is a crucial aspect of a company's financial performance. Effective working capital management can help companies to improve their profit statement, reduce the risk of failure, and strengthen their negotiation position. This study provides insights into the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX. The results of this study can be used as a reference for companies to improve their working capital management and achieve better financial performance targets.

Limitations of the Study

This study has some limitations. The study uses data from 10 companies listed on the IDX, which may not be representative of all companies in the IDX. Additionally, the study only examines the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX. Future studies can examine the effect of working capital funding on the financial performance of companies in other sectors or industries.

Future Research Directions

Future studies can examine the effect of working capital funding on the financial performance of companies in other sectors or industries. Additionally, future studies can investigate the impact of other factors, such as market conditions, economic conditions, and company-specific factors, on the financial performance of companies.

References

[1] Indonesia Stock Exchange. (2022). Annual Report.
[2] Company A. (2022). Annual Report.
[3] Company B. (2022). Annual Report.
[4] Company C. (2022). Annual Report.
[5] Company D. (2022). Annual Report.
[6] Company E. (2022). Annual Report.
[7] Company F. (2022). Annual Report.
[8] Company G. (2022). Annual Report.
[9] Company H. (2022). Annual Report.
[10] Company I. (2022). Annual Report.

Note: The references provided are fictional and for demonstration purposes only.
Frequently Asked Questions: The Effect of Working Capital Funding on the Financial Performance of Companies in Various Industrial Sectors Listed on the Indonesia Stock Exchange

Q: What is working capital, and why is it important for companies?

A: Working capital is a current asset used to run daily business operations. It is essential for companies to manage their working capital effectively to meet their short-term obligations, maintain operational smoothness, and develop their business.

Q: What are the sources of working capital funding?

A: Working capital can come from internal sources, such as retained earnings, or external sources, such as bank loans and bond issuance.

Q: How does working capital funding affect the financial performance of companies?

A: Proper working capital funding can have a positive impact on the company's financial performance. It can improve the profit statement, reduce the risk of failure, and strengthen the negotiation position.

Q: What are the benefits of effective working capital management?

A: Effective working capital management can help companies to:

Meet short-term obligations: Payment of salaries, raw materials, and other bills can be met on time.
Maintaining operational smoothness: The company can continue to operate without obstacles because of sufficient working capital needs.
Developing a business: With adequate working capital, companies can expand, innovate, or make new investments.

Q: What are the limitations of this study?

A: This study has some limitations. The study uses data from 10 companies listed on the IDX, which may not be representative of all companies in the IDX. Additionally, the study only examines the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX.

Q: What are the future research directions?

A: Future studies can examine the effect of working capital funding on the financial performance of companies in other sectors or industries. Additionally, future studies can investigate the impact of other factors, such as market conditions, economic conditions, and company-specific factors, on the financial performance of companies.

Q: What are the recommendations for companies?

A: The results of this study indicate that the importance of effective working capital management to improve the financial performance of the company of the various industrial sectors in the IDX. Here are some recommendations:

Analysis of Working Capital Needs: The company needs to regularly analyze the needs of working capital based on the operating cycle and its business strategy.
Choosing the right funding source: Choosing a funding source in accordance with the needs and profile of the company's risk is very important.
Managing cash flow efficiently: The company needs to implement a structured cash flow management system to maximize the use of working capital.

Q: What are the implications of this study for companies and investors?

A: The results of this study can be used as a reference for companies to improve their working capital management and achieve better financial performance targets. Investors can also use this study to make informed decisions about investing in companies with effective working capital management.

Q: What are the future implications of this study?

A: The results of this study can be used as a reference for future studies on the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX. Additionally, the study can be used as a reference for companies and investors to make informed decisions about working capital management.

Q: What are the limitations of the data used in this study?

A: The study uses data from 10 companies listed on the IDX, which may not be representative of all companies in the IDX. Additionally, the study only examines the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX.

Q: What are the future research directions for this study?

Q: What are the recommendations for future research?

A: Future studies should examine the effect of working capital funding on the financial performance of companies in other sectors or industries. Additionally, future studies should investigate the impact of other factors, such as market conditions, economic conditions, and company-specific factors, on the financial performance of companies.

Q: What are the implications of this study for policymakers?

A: The results of this study can be used as a reference for policymakers to develop policies that support effective working capital management and improve the financial performance of companies in various industrial sectors listed on the IDX.

Q: What are the future implications of this study for policymakers?

A: The results of this study can be used as a reference for future studies on the effect of working capital funding on the financial performance of companies in various industrial sectors listed on the IDX. Additionally, the study can be used as a reference for policymakers to develop policies that support effective working capital management and improve the financial performance of companies.