LIQUIDITY, SOLVENCY, AND PROFITABILITY RATIOS OF FOOD AND BEVERAGE MANUFACTURES

Abstract

This research aims to identify and analyze the causal relationship of liquidity and solvency ratios to profitability ratios. The sample includes eight food and beverage manufactures listed on Stock Exchange of Indonesia. The analysis technique uses path analysis supported by eviews software. The influence of quick ratio, debt to equity ratio, and ratio of debt to asset on net profit margin were significant both partially and simultaneously. The influence of net profit margin and debt to equity ratio on return on equity were partially significant. The affect of quick ratio, debt to equity ratio, debt to asset ratio, and net profit margin on return on equity were simultaneously significant. The strongest effect was on the debt to equity ratio on return on equity. Food and beverage company management can increase net income by increasing debt, both current and long-term debt. Net profit margin mediation reduces the total effect of exogenous variables on net income to equity. Financial performance improvement preferably by focusing on the net income to equity ratio directly