Profitability and Efficiency Analysis on Automotive and Component Industry in Indonesia

Riandy Yeremia Pakpahan, Purwanto
Management, President University


This study aims to analyse the determining factors of profitability and efficiency in automotive and component companies in Indonesia from 2010 to 2019. The research data were taken from the financial statements of seven selected sample companies on the Indonesian Stock Exchange. The method employed was a quantitative approach, including multiple regression analysis and Data Envelopment Analysis, using tools like EViews and MaxDEA. The results showed that the current ratio, accounts receivable turnover, inventory turnover, and working capital had a positive effect on return on assets. On the other hand, the debt-to-equity ratio and firm size had a negative effect. The coefficient of determination showed that the independent variable had a significant effect on profitability by 53.00%. The ratio of debt to equity accounts receivable turnover, inventory turnover, and firm size had a significant effect on profitability. On the other hand, the current ratio and working capital turnover had no significant effect. The debt-to-equity ratio is the most influential variable on return on assets compared to other independent variables. Based on the results of technical efficiency, only one company was able to achieve full efficiency in ten years. The average overall score of technical efficiency in all samples over the ten years was 75.3%, and there is still an increase in efficiency of 24.7%. The implications of these results can be used by investors and automotive companies to evaluate company performance.

Keywords: Determinant factors, Efficiency, Firm size, Return on assets