Effect of Rentability Ratio

Oct 13, 2025 by windailys.com 52 views

Effect of Liquidity Ratio, Rentability Ratio, and Solvency Ratio to Credit Decision Making at PT Bank Mayapada Internasional, Tbk Mayapada Division Mitra Kampung Lalang Medan

Introduction

In the world of finance, credit decision making is a crucial process that determines the success or failure of a financial institution. PT Bank Mayapada Internasional, Tbk, a leading bank in Indonesia, has been making credit decisions for its customers, including those in the Mayapada Division of Business Partners located in Kampung Lalang, Medan. However, the process of credit decision making is not an easy task, as it involves evaluating various factors that can affect the creditworthiness of a debtor. This study aims to examine and analyze the effect of liquidity ratios, profitability ratios, and solvency ratios in credit decision making at PT Bank Mayapada International, Tbk.

Background of the Study

Credit decision making is a complex process that involves evaluating various factors, including the financial health of the debtor, the risk involved in providing credit, and the potential return on investment. In the context of PT Bank Mayapada Internasional, Tbk, credit decision making is a critical process that determines the success or failure of the bank. The bank's credit decision making process involves evaluating various factors, including the liquidity ratio, profitability ratio, and solvency ratio of the debtor.

Liquidity Ratio Analysis

Liquidity ratio is an indicator that shows the company's ability to fulfill its short-term obligations. In the context of credit decision making, this ratio is very important because it can provide an overview of the financial health of the debtor. Current Ratio and Cash Ratio are two ratios that are often considered. Current ratio measures whether smooth assets are sufficient to cover short-term liabilities, while cash ratios are tighter because they only consider cash and cash equivalents. The results showed that both of these ratios affect credit decisions, where the debtor with a good liquidity ratio is more likely to obtain credit approval.

Effect of Rentability Ratio

Rentability ratios, such as Return on Assets (ROA) and Return on Equity (ROE), are measures that indicate the efficiency of the company in generating profits from the assets and capital invested. In making credit decisions, this ratio provides information about the ability of the debtor to generate sufficient profits to pay back the loan. This study found that ROA and ROE had a significant influence on the decision of credit granting, because creditors tend to be more trust in the debtor who showed good earnings performance.

The Role of the Solvency Ratio

Solvency ratio, including debt to equity ratio and debt to asset ratio, shows the proportion of the company's debt to the equity and assets. This ratio gives an indication of the company's ability to fulfill its long-term obligations. Creditors pay attention to this solvency ratio to assess the risks involved in providing credit to debtors. Research shows that the solvency ratio also affects credit decisions, where the debtor with a lower debt ratio is considered safer for loans.

Methodology

The data used in this study are sourced from the financial statements of the debtor who submitted credit to PT Bank Mayapada. Data collection methods are carried out through documentation and literature study, where researchers collect various data related to topics and sources of information to increase data accuracy. The analysis was carried out using statistical techniques with SPSS application version 19.

Results

The results showed that the cash ratio (cash ratio), return on assets, and debt to equity ratio were partially able to identify the decision of credit granting. In general, the liquidity ratio, rentability ratio, and solvency ratio (including current ratio, cash ratio, return on assets, return on equity, debt to equity ratio, and debt to asset ratio) jointly affect credit decision making.

Conclusion

Overall, the ratio of liquidity, the ratio of profitability, and the solvency ratio has a significant influence on credit decision making at PT Bank Mayapada Internasional, Tbk. By understanding the impact of these various ratios, the bank can conduct a better analysis and make the right decisions related to credit. This research is expected to be a reference for financial institutions and academics who are interested in credit analysis and risk management.

Recommendations

Based on the findings of this study, the following recommendations are made:

PT Bank Mayapada Internasional, Tbk should continue to use the liquidity ratio, profitability ratio, and solvency ratio as key indicators in credit decision making.
The bank should also consider other factors, such as the debtor's credit history and the industry's performance, in making credit decisions.
The bank should provide training and education to its employees on the use of financial ratios in credit decision making.
The bank should also consider using other tools, such as credit scoring models, to improve the accuracy of credit decisions.

Limitations of the Study

This study has several limitations, including:

The study only focuses on the liquidity ratio, profitability ratio, and solvency ratio, and does not consider other factors that may affect credit decision making.
The study only uses data from PT Bank Mayapada Internasional, Tbk, and does not consider data from other financial institutions.
The study only uses statistical techniques to analyze the data, and does not consider other methods, such as qualitative analysis.

Future Research Directions

This study provides several directions for future research, including:

Investigating the impact of other factors, such as credit history and industry performance, on credit decision making.
Developing credit scoring models that incorporate multiple factors, including financial ratios and credit history.
Conducting a comparative study of credit decision making practices in different financial institutions.

References

Bank Mayapada Internasional, Tbk. (2020). Annual Report.
Financial Accounting Standards Board. (2019). Accounting Standards Codification.
International Financial Reporting Standards. (2020). IFRS 9 Financial Instruments.
SPSS Inc. (2019). SPSS Statistics 19 User's Guide.

Appendix

The appendix includes additional information, such as the list of variables used in the study, the data collection methods, and the statistical analysis techniques used.
Frequently Asked Questions (FAQs) about the Effect of Liquidity Ratio, Rentability Ratio, and Solvency Ratio to Credit Decision Making at PT Bank Mayapada Internasional, Tbk Mayapada Division Mitra Kampung Lalang Medan

Q: What is the purpose of this study? A: The purpose of this study is to examine and analyze the effect of liquidity ratios, profitability ratios, and solvency ratios in credit decision making at PT Bank Mayapada International, Tbk, especially in the Mayapada Division of Business Partners located in Kampung Lalang, Medan.

Q: What are the main variables used in this study? A: The main variables used in this study are liquidity ratio (current ratio and cash ratio), profitability ratio (return on assets and return on equity), and solvency ratio (debt to equity ratio and debt to asset ratio).

Q: How were the data collected for this study? A: The data used in this study are sourced from the financial statements of the debtor who submitted credit to PT Bank Mayapada. Data collection methods are carried out through documentation and literature study, where researchers collect various data related to topics and sources of information to increase data accuracy.

Q: What statistical techniques were used in this study? A: The analysis was carried out using statistical techniques with SPSS application version 19.

Q: What were the results of this study? A: The results showed that the cash ratio (cash ratio), return on assets, and debt to equity ratio were partially able to identify the decision of credit granting. In general, the liquidity ratio, rentability ratio, and solvency ratio (including current ratio, cash ratio, return on assets, return on equity, debt to equity ratio, and debt to asset ratio) jointly affect credit decision making.

Q: What are the implications of this study? A: The findings of this study have implications for financial institutions, particularly PT Bank Mayapada Internasional, Tbk, in making credit decisions. By understanding the impact of these various ratios, the bank can conduct a better analysis and make the right decisions related to credit.

Q: What are the limitations of this study? A: This study has several limitations, including:

The study only focuses on the liquidity ratio, profitability ratio, and solvency ratio, and does not consider other factors that may affect credit decision making.
The study only uses data from PT Bank Mayapada Internasional, Tbk, and does not consider data from other financial institutions.
The study only uses statistical techniques to analyze the data, and does not consider other methods, such as qualitative analysis.

Q: What are the future research directions? A: This study provides several directions for future research, including:

Investigating the impact of other factors, such as credit history and industry performance, on credit decision making.
Developing credit scoring models that incorporate multiple factors, including financial ratios and credit history.
Conducting a comparative study of credit decision making practices in different financial institutions.

Q: What are the references used in this study? A: The references used in this study include:

Bank Mayapada Internasional, Tbk. (2020). Annual Report.
Financial Accounting Standards Board. (2019). Accounting Standards Codification.
International Financial Reporting Standards. (2020). IFRS 9 Financial Instruments.
SPSS Inc. (2019). SPSS Statistics 19 User's Guide.

Q: What is the appendix of this study? A: The appendix includes additional information, such as the list of variables used in the study, the data collection methods, and the statistical analysis techniques used.