Companies should prioritize a healthy capital structure

Oct 13, 2025 by recoveryshake.com 136 views

Factors that Influence Investment Decisions in Consumer Goods Companies on the Indonesia Stock Exchange

Introduction

Investment decisions are crucial for companies, especially for consumer goods companies listed on the Indonesia Stock Exchange. These decisions are closely related to the use of corporate funds in a certain period of time, with the hope of getting optimal profits during that period. In this context, research aims to test and analyze the influence of five key factors - net profit, capital structure, return on investment (ROI), total debt, and sales levels - both partially and simultaneously on investment decisions.

Background

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a market capitalization of over $500 billion. The IDX is home to over 600 listed companies, including consumer goods companies that are among the most popular and widely held stocks. Consumer goods companies are a significant sector in the IDX, accounting for over 20% of the total market capitalization.

Investment decisions in consumer goods companies are influenced by various factors, including financial performance, market conditions, and investor sentiment. However, the relationship between these factors and investment decisions is not well understood, and there is a need for research to identify the key drivers of investment decisions in this sector.

Research Methodology

This study used data from nine consumer goods companies listed on the Indonesia Stock Exchange between 2002 and 2006. Secondary data were obtained from the Indonesian Capital Market Directory. Hypothesis testing was carried out by multiple linear regression methods using SPSS software.

Research and Analysis Results

The results showed that there was a significant influence between the capital structure, ROI, and the level of sales on investment decisions, both individually (partially) and simultaneously (simultaneously). Of the five factors analyzed, the capital structure is found as the most dominant factor in influencing investment decisions.

The Meaning of Capital Structure

The capital structure reflects company policies related to the combination of debt and own capital used to carry out its operations. Companies with a healthy capital structure usually have better ability to attract investors, because this shows the ability to manage risk and maximize profits. This has a direct impact on investor confidence in making investment decisions.

A healthy capital structure is characterized by a mix of debt and equity that is optimal for the company's business needs. This can include a combination of short-term and long-term debt, as well as equity financing through share issues. Companies with a healthy capital structure are better able to manage their financial risks and are more attractive to investors.

Effect of ROI and Sales Level

In addition to the capital structure, ROI and sales level also play an important role. ROI shows the company's efficiency in generating profits from total investment, while sales levels reflect the extent to which the company's products are accepted by the market. Both can be an indicator of company performance that attracts investors to invest further.

ROI is an important metric for investors, as it shows the company's ability to generate profits from its investments. A high ROI indicates that the company is able to generate significant profits from its investments, which can attract investors to invest further.

Sales levels are also an important indicator of company performance, as they reflect the extent to which the company's products are accepted by the market. High sales levels can indicate that the company's products are in high demand, which can attract investors to invest further.

Total Debt and Net Profit

Although total debt and net profit are factors that are also considered, the results show that the impact is not as strong as other factors within the framework of investment decisions. High total debt can cause concerns about financial risk, while low net profit can show problems in the company's operations.

Total debt can be a concern for investors, as it can indicate that the company is taking on too much risk. High total debt can also make it difficult for the company to meet its financial obligations, which can lead to financial distress.

Net profit is also an important metric for investors, as it shows the company's ability to generate profits from its operations. Low net profit can indicate that the company is experiencing problems in its operations, which can attract investors to invest further.

Conclusion

This study provides valuable insight into the factors that influence investment decisions in consumer goods companies on the Indonesia Stock Exchange. Among all the factors studied, the capital structure is the main influence that must be considered by company management in their investment strategy. By understanding this relationship, the company can formulate a better strategy to optimize investment decisions and attract more interest from potential investors.

This conclusion is not only relevant for stakeholders in the consumer goods sector, but also for investors and market analysts who want to understand the dynamics of investment on the Indonesia Stock Exchange. The findings of this study can be used to inform investment decisions and to develop strategies for attracting investors to the sector.

Recommendations

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

Companies should prioritize a healthy capital structure: Companies should aim to have a mix of debt and equity that is optimal for their business needs. This can include a combination of short-term and long-term debt, as well as equity financing through share issues.
Investors should consider ROI and sales level: Investors should consider ROI and sales level when making investment decisions. A high ROI and high sales level can indicate that the company is able to generate significant profits from its investments and has a strong market presence.
Companies should manage total debt carefully: Companies should manage total debt carefully to avoid taking on too much risk. High total debt can make it difficult for the company to meet its financial obligations, which can lead to financial distress.
Investors should consider net profit: Investors should consider net profit when making investment decisions. Low net profit can indicate that the company is experiencing problems in its operations, which can attract investors to invest further.

By following these recommendations, companies and investors can make more informed investment decisions and develop strategies to optimize investment outcomes.
Frequently Asked Questions (FAQs) about Factors that Influence Investment Decisions in Consumer Goods Companies on the Indonesia Stock Exchange

Q: What are the key factors that influence investment decisions in consumer goods companies on the Indonesia Stock Exchange?

A: The key factors that influence investment decisions in consumer goods companies on the Indonesia Stock Exchange are net profit, capital structure, return on investment (ROI), total debt, and sales levels.

Q: Why is capital structure an important factor in investment decisions?

A: Capital structure is an important factor in investment decisions because it reflects a company's ability to manage risk and maximize profits. A healthy capital structure can attract investors and improve a company's creditworthiness.

Q: What is the relationship between ROI and investment decisions?

A: ROI is an important metric for investors, as it shows a company's ability to generate profits from its investments. A high ROI can attract investors to invest further.

Q: How does sales level influence investment decisions?

A: Sales level is an important indicator of company performance, as it reflects the extent to which a company's products are accepted by the market. High sales levels can indicate that a company's products are in high demand, which can attract investors to invest further.

Q: What is the impact of total debt on investment decisions?

A: Total debt can be a concern for investors, as it can indicate that a company is taking on too much risk. High total debt can also make it difficult for a company to meet its financial obligations, which can lead to financial distress.

Q: How does net profit influence investment decisions?

A: Net profit is an important metric for investors, as it shows a company's ability to generate profits from its operations. Low net profit can indicate that a company is experiencing problems in its operations, which can attract investors to invest further.

Q: What are the implications of this study for investors and market analysts?

A: The findings of this study can be used to inform investment decisions and to develop strategies for attracting investors to the sector. Investors and market analysts can use this information to make more informed decisions and to identify opportunities for growth.

Q: What are the limitations of this study?

A: This study has several limitations, including the use of secondary data and the focus on a specific sector (consumer goods). Future studies can build on this research by using primary data and exploring other sectors.

Q: What are the future research directions for this study?

A: Future research directions for this study include exploring the impact of other factors on investment decisions, such as market conditions and investor sentiment. Additionally, future studies can examine the relationship between investment decisions and company performance in other sectors.

Q: What are the practical implications of this study for companies and investors?

A: The practical implications of this study for companies and investors are that they should prioritize a healthy capital structure, consider ROI and sales level, manage total debt carefully, and consider net profit when making investment decisions.

Q: What are the policy implications of this study?

A: The policy implications of this study are that regulatory bodies and policymakers should consider the impact of capital structure, ROI, sales level, total debt, and net profit on investment decisions when developing policies to support the growth of the Indonesia Stock Exchange.