The Effects of Current Ratio (CR) and Debt to Equity Ratio (DER) on Net Profit Margin (NPM) and Price to Book Value (PBV) of Consumer Goods Companies Listed on the Indonesia Stock Exchange during 2016–2018
Abstract
This study examines the effects of Current Ratio (CR) and Debt to Equity Ratio (DER) on Net Profit Margin (NPM) and Price to Book Value (PBV) of consumer goods companies listed on the Indonesia Stock Exchange during 2016–2018. The study uses a quantitative approach with secondary data obtained from companies' financial reports. The sample was selected using purposive sampling, resulting in 15 companies from a population of 22 companies. Data were analyzed using path analysis, supported by t-tests and F-tests. The results indicate that CR has a significant negative effect on NPM, while DER also has a significant negative effect on NPM. Furthermore, CR and DER have significant effects on PBV, while NPM has a significant effect on PBV. The first structural model produces an R² of 0.256, indicating that CR and DER jointly explain 25.6% of the variation in NPM. The second model produces an R² of 0.502, indicating that CR, DER, and NPM jointly explain 50.2% of the variation in PBV. These findings indicate that liquidity, capital structure, and profitability are associated with the market valuation of the companies examined.
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