The Effect of Working Capital Turnover, Sales Growth, and Liquidity on Profitability with Business Risk as a Moderating Variable

Abstrak

This study aims to analyze the effect of working capital turnover, sales growth, and liquidity on profitability with business risk as a moderating variable. Profitability is an important indicator of a company's financial performance, reflecting its ability to generate optimal profits amidst business competition and uncertainty in the business environment. Differences in previous research results encourage the need for further study by including business risk as a moderating variable. This study uses a quantitative approach with an explanatory research type. The data used are secondary data in the form of financial statements of companies listed on the Indonesia Stock Exchange during a certain observation period and selected using a purposive sampling technique. Data analysis was performed using multiple linear regression methods and Moderated Regression Analysis (MRA). Profitability is proxied by Return on Assets (ROA), working capital turnover is measured by the working capital turnover ratio, sales growth is measured by the annual sales growth rate, liquidity is proxied by the Current Ratio, while business risk is measured by operating profit volatility. The results show that, partially, working capital turnover and sales growth have a positive and significant effect on profitability, while liquidity influences profitability with a tendency for a non-linear relationship. Furthermore, business risk has been shown to act as a moderating variable, capable of moderating the effects of working capital turnover, sales growth, and liquidity on profitability. This research is expected to provide theoretical contributions to the development of corporate finance literature and provide practical considerations for management and investors in making financial decisions based on business risk levels.