The Effect Of Financial Ratios On Increasing Firm Value

Abstract

The purpose of this study is to determine whether profitability, leverage, and liquidity influence firm value. The research population consists of 239 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period 2018–2022. The sample was selected using a purposive sampling technique, resulting in 66 companies that met the established criteria. The data used were secondary data, namely the companies' annual financial reports published on the official website of the Indonesia Stock Exchange (www.idx.co.id). The data analysis method used multiple linear regression analysis with panel data processed using E-Views software version 12. The results showed that profitability, proxied by Return on Assets (ROA), leverage, proxied by Debt to Equity Ratio (DER), and liquidity, proxied by Current Ratio (CR), had a positive and significant effect on firm value, proxied by Price to Book Value (PBV). The conclusion of this study is that the variables ROA, DER, and CR have a positive and significant effect on firm value. It is recommended that future researchers conducting research on firm value include additional activity ratios. Activity ratio analysis can provide information about the company's effectiveness in using its activities.