Gross profit on total assets

Oct 13, 2025 by recoveryshake.com 101 views

Analysis of Company Fundamental Factors and Economic Fundamentals that Affect the Systematic Risk of Open Manufacturing Companies in the Jakarta Stock Exchange

Introduction

The Jakarta Stock Exchange (JSX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed across various industries. Among these, manufacturing companies play a significant role in the economy, contributing to the country's GDP and employment. However, like any other company, manufacturing companies are not immune to risks, including systematic risk, which is a measure of the risk associated with the overall market. This study aims to analyze the effect of company fundamental factors and economic fundamentals on the systematic risk of manufacturing companies listed on the Jakarta Stock Exchange.

Literature Review

Systematic risk is a key concept in finance that refers to the risk associated with the overall market. It is often measured using the beta coefficient, which represents the volatility of a company's stock relative to the overall market. Several studies have investigated the factors that affect systematic risk, including company fundamental factors and economic fundamentals. Company fundamental factors include financial ratios such as asset growth, leverage, liquidity, profit growth, ROI, and ROA, which reflect a company's financial health and performance. Economic fundamentals, on the other hand, include macroeconomic variables such as economic growth, interest rates, exchange rates, and inflation, which affect the overall market.

Methodology

This study uses a multiple regression analysis to examine the relationship between company fundamental factors, economic fundamentals, and systematic risk. The data used in this study are manufacturing company data listed on the Jakarta Stock Exchange in the period 2000 to 2004. Of the 101 manufacturing companies, 58 companies meet the specified criteria and are used as samples. The data are obtained from the Indonesian Capital Market Directory published by the Jakarta Stock Exchange.

Results

The results of this study show that company fundamental factors have a significant influence on systematic risk. The factors that have a significant effect are:

Gross profit on total assets: Companies with a high ratio of gross profit to total assets tend to have a lower systematic risk, as they are able to produce greater profits than the assets they have.
Current assets of total assets: Companies with a high ratio of current assets to total assets tend to have a lower systematic risk, as they have better liquidity to meet obligations.
Long-term debt to total assets: Companies with a high ratio of long-term debt to total assets tend to have a higher systematic risk, as they bear the greater interest expense.

On the other hand, economic fundamental factors do not show a significant effect on systematic risk. This may be caused by other factors that are more dominant, such as the company's fundamental factors.

Additional Analysis and Explanation

Company Fundamental Factors

The results of this study show that the company's financial condition internally has a strong impact on systematic risk. Companies with a high ratio of gross profit to total assets tend to have a lower systematic risk, as they are able to produce greater profits than the assets they have. Likewise, companies with a high ratio of current assets to total assets tend to have a lower systematic risk, as they have better liquidity to meet obligations. However, companies with a high ratio of long-term debt to total assets tend to have a higher systematic risk, as they bear the greater interest expense.

Economic Fundamental Factors

The results of this study show that macroeconomic conditions have no significant influence on the systematic risk of manufacturing companies under study. This may be caused by other factors that are more dominant, such as the company's fundamental factors. However, it is essential to note that these results may be different for different periods of time and industrial sectors.

Conclusion and Implications

The conclusion of this study is that the company's fundamental factors have a stronger influence on the systematic risk of manufacturing companies compared to economic fundamental factors. This emphasizes the importance of investors to pay attention to the company's financial condition internally before investing. Investors need to analyze the company's financial statements carefully, especially ratios that reflect profitability, liquidity, and leverage, to assess the systematic risk of the company.

This research also has implications for manufacturing company managers. Managers need to understand the factors that affect the systematic risk of the company and take the steps needed to manage these risks. For example, companies can increase profitability and liquidity through good operational efficiency and financial management. They also need to pay attention to capital structures and minimize leverage to reduce systematic risk.

Recommendations for Future Research

This study provides a foundation for future research on the systematic risk of manufacturing companies. Future studies can investigate the impact of other factors, such as industry-specific factors, on systematic risk. Additionally, researchers can examine the relationship between systematic risk and other financial metrics, such as return on equity (ROE) and return on assets (ROA).

Limitations of the Study

This study has several limitations. Firstly, the data used in this study are limited to manufacturing companies listed on the Jakarta Stock Exchange in the period 2000 to 2004. Future studies can use more extensive data sets to examine the relationship between company fundamental factors, economic fundamentals, and systematic risk. Secondly, this study uses a multiple regression analysis, which assumes a linear relationship between the independent variables and the dependent variable. Future studies can use other statistical techniques, such as logistic regression or decision trees, to examine the relationship between the variables.

Conclusion

In conclusion, this study provides evidence that company fundamental factors have a significant influence on systematic risk, while economic fundamental factors do not. This emphasizes the importance of investors to pay attention to the company's financial condition internally before investing. Managers also need to understand the factors that affect the systematic risk of the company and take the steps needed to manage these risks. Future research can build on this study by investigating the impact of other factors on systematic risk and examining the relationship between systematic risk and other financial metrics.
Q&A: Systematic Risk Analysis of Open Manufacturing Companies on the Jakarta Stock Exchange

Introduction

In our previous article, we discussed the analysis of company fundamental factors and economic fundamentals that affect the systematic risk of open manufacturing companies in the Jakarta Stock Exchange. In this article, we will provide a Q&A section to further clarify the concepts and findings of the study.

Q1: What is systematic risk, and why is it important for investors?

A1: Systematic risk refers to the risk associated with the overall market, which can affect the performance of a company's stock. It is essential for investors to understand systematic risk because it can impact their investment returns and portfolio performance.

Q2: What are the company fundamental factors that affect systematic risk?

A2: The company fundamental factors that affect systematic risk include:

Gross profit on total assets: Companies with a high ratio of gross profit to total assets tend to have a lower systematic risk.
Current assets of total assets: Companies with a high ratio of current assets to total assets tend to have a lower systematic risk.
Long-term debt to total assets: Companies with a high ratio of long-term debt to total assets tend to have a higher systematic risk.

Q3: Why do economic fundamental factors not have a significant effect on systematic risk?

A3: Economic fundamental factors, such as economic growth, interest rates, exchange rates, and inflation, may not have a significant effect on systematic risk because other factors, such as company fundamental factors, may be more dominant.

Q4: What are the implications of this study for investors?

A4: The findings of this study emphasize the importance of investors paying attention to the company's financial condition internally before investing. Investors need to analyze the company's financial statements carefully, especially ratios that reflect profitability, liquidity, and leverage, to assess the systematic risk of the company.

Q5: What are the implications of this study for manufacturing company managers?

A5: The findings of this study suggest that manufacturing company managers need to understand the factors that affect the systematic risk of the company and take the steps needed to manage these risks. For example, companies can increase profitability and liquidity through good operational efficiency and financial management. They also need to pay attention to capital structures and minimize leverage to reduce systematic risk.

Q6: What are the limitations of this study?

A6: This study has several limitations, including:

Limited data set: The data used in this study are limited to manufacturing companies listed on the Jakarta Stock Exchange in the period 2000 to 2004.
Assumption of linearity: The study assumes a linear relationship between the independent variables and the dependent variable.

Q7: What are the recommendations for future research?

A7: Future research can build on this study by:

Investigating the impact of other factors on systematic risk: Future studies can examine the impact of other factors, such as industry-specific factors, on systematic risk.
Examining the relationship between systematic risk and other financial metrics: Researchers can investigate the relationship between systematic risk and other financial metrics, such as return on equity (ROE) and return on assets (ROA).

Conclusion

In conclusion, this Q&A section provides further clarification on the concepts and findings of the study. We hope that this article has provided valuable insights for investors, manufacturing company managers, and researchers interested in systematic risk analysis.