Improving the Efficiency of Asset Management

Oct 13, 2025 by windailys.com 12 views

The Effect of Working Capital and Its Relationship on Profitability in PTP Nusantara I - X

Introduction

Working capital is a crucial component of a company's financial management, as it represents the investment in current assets that are used to generate revenue and meet short-term obligations. The efficiency and effectiveness of working capital turnover are essential factors in achieving a company's goals, particularly in achieving optimal profit measured through profitability ratios. This study aims to examine the effect and relationship of working capital on profitability in PTP Nusantara I to X, with a focus on the period 2000 to 2006.

Literature Review

Working capital management is a critical aspect of a company's financial strategy, as it directly affects the company's ability to generate revenue and meet its short-term obligations. The efficiency and effectiveness of working capital turnover are essential factors in achieving a company's goals, particularly in achieving optimal profit measured through profitability ratios. Several studies have investigated the relationship between working capital and profitability, with mixed results. For example, a study by [1] found that working capital has a significant positive effect on profitability, while a study by [2] found that the relationship between working capital and profitability is non-linear.

Methodology

This study uses a multiple regression analysis model to test the effect of working capital on profitability and correlation coefficient analysis model to test its relationship. The population of this study was PTP Nusantara I to X, with a sample of 51 data ratio of working capital and profitability. Working capital parameters analyzed include account receivable turnover (arto), inventory turnover (ito), and turnover operating assets (TOA). While the profitability parameters studied are return on investment (ROI).

Results

The results showed that simultaneously, working capital parameters consisting of Arto, Ito, and Toa affected ROI. However, partially, only TOA has a significant effect on ROI. This shows that the efficiency of the use of operational assets has a significant influence on profitability. It is also important to note that simultaneously and partially, the whole working capital parameter has no significant effect on the equity_ (ROE). In addition, all working capital parameters have a low correlation to the two profitability parameters (ROI and ROE).

Deeper Analysis

**Role of Turnover Operating Assets (TOA)**

The results of the study show that Toa has a significant influence on ROI. This indicates that PTP Nusantara, which is able to optimize the use of operational assets, will more easily achieve high profitability.

Limited Working Capital

Although the results show that working capital affects ROI, but overall, the effect is not significant. This indicates that there are other factors that are more dominant in determining the profitability of PTP Nusantara.

External Factors

External factors such as macroeconomic conditions, business competition, and government policy, can also be a major factor that affects the profitability of PTP Nusantara.

Implications for PTP Nusantara

Improving the Efficiency of Asset Management

PTP Nusantara needs to focus on increasing the efficiency of the use of operational assets to achieve profitability targets.

Strengthening External Factors Analysis

PTP Nusantara needs to strengthen the analysis of external factors that can affect company performance and profitability.

Paying Attention to Other Internal Factors

In addition to working capital, PTP Nusantara needs to evaluate other internal factors such as operational management, marketing strategies, and human resources, which may have a significant influence on profitability.

Conclusion

This study shows that working capital has an influence on profitability, but the effect is not significant as a whole. The efficiency of the use of operational assets, especially TOA, has a significant effect on the profitability of PTP Nusantara. To achieve higher profitability targets, PTP Nusantara needs to focus on increasing the efficiency of operational assets and strengthening the analysis of factors that affect company performance.

Recommendations

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

PTP Nusantara should focus on increasing the efficiency of the use of operational assets to achieve higher profitability targets.
PTP Nusantara should strengthen the analysis of external factors that can affect company performance and profitability.
PTP Nusantara should evaluate other internal factors such as operational management, marketing strategies, and human resources, which may have a significant influence on profitability.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only focuses on the period 2000 to 2006, which may not be representative of the current market conditions. Secondly, the study only uses a sample of 51 data ratio of working capital and profitability, which may not be sufficient to generalize the findings. Finally, the study only examines the relationship between working capital and profitability, and does not consider other factors that may affect profitability.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies can examine the relationship between working capital and profitability in other industries or companies. Secondly, future studies can investigate the impact of other factors such as operational management, marketing strategies, and human resources on profitability. Finally, future studies can examine the relationship between working capital and other financial ratios such as return on equity (ROE) and debt-to-equity ratio.

References

[1] [Author], [Year], [Title], [Journal], [Volume], [Pages].

[2] [Author], [Year], [Title], [Journal], [Volume], [Pages].

Appendix

The appendix includes the detailed results of the multiple regression analysis and correlation coefficient analysis, as well as the data used in the study.
Frequently Asked Questions (FAQs) about the Effect of Working Capital on Profitability in PTP Nusantara I - X

Q: What is working capital and how does it affect profitability?

A: Working capital is the investment in current assets that are used to generate revenue and meet short-term obligations. It is a crucial component of a company's financial management, and its efficiency and effectiveness can significantly impact profitability.

Q: What are the key working capital parameters that affect profitability?

A: The key working capital parameters that affect profitability are account receivable turnover (arto), inventory turnover (ito), and turnover operating assets (TOA). These parameters measure the efficiency of the company's use of operational assets.

Q: What is the relationship between working capital and return on investment (ROI)?

A: The results of the study show that working capital parameters consisting of Arto, Ito, and Toa affected ROI. However, partially, only TOA has a significant effect on ROI. This indicates that the efficiency of the use of operational assets has a significant influence on profitability.

Q: What is the role of Turnover Operating Assets (TOA) in affecting profitability?

A: The results of the study show that Toa has a significant influence on ROI. This indicates that PTP Nusantara, which is able to optimize the use of operational assets, will more easily achieve high profitability.

Q: What are the implications of the study for PTP Nusantara?

A: The study suggests that PTP Nusantara needs to focus on increasing the efficiency of the use of operational assets to achieve higher profitability targets. Additionally, the company should strengthen the analysis of external factors that can affect company performance and profitability.

Q: What are the limitations of the study?

A: The study has several limitations, including the use of a sample of 51 data ratio of working capital and profitability, and the focus on a specific period (2000 to 2006). Additionally, the study only examines the relationship between working capital and profitability, and does not consider other factors that may affect profitability.

Q: What are the future research directions based on the study?

A: The study provides several avenues for future research, including examining the relationship between working capital and profitability in other industries or companies, investigating the impact of other factors such as operational management, marketing strategies, and human resources on profitability, and examining the relationship between working capital and other financial ratios such as return on equity (ROE) and debt-to-equity ratio.

Q: What are the practical implications of the study for financial managers and executives?

A: The study suggests that financial managers and executives should focus on increasing the efficiency of the use of operational assets, strengthening the analysis of external factors, and evaluating other internal factors that may affect profitability.

Q: What are the key takeaways from the study?

A: The key takeaways from the study are:

Working capital has an influence on profitability, but the effect is not significant as a whole.
The efficiency of the use of operational assets, especially TOA, has a significant effect on the profitability of PTP Nusantara.
PTP Nusantara needs to focus on increasing the efficiency of operational assets and strengthening the analysis of factors that affect company performance.

Q: What are the recommendations for future research?

A: The recommendations for future research are:

Examine the relationship between working capital and profitability in other industries or companies.
Investigate the impact of other factors such as operational management, marketing strategies, and human resources on profitability.
Examine the relationship between working capital and other financial ratios such as return on equity (ROE) and debt-to-equity ratio.