THE INFLUENCE OF CURRENT RATIO, RETURN ON ASSET, AND DEBT TO EQUITY RATIO ON EARNINGS QUALITY (A STUDY ON CONSUMER GOODS SECTOR MANUFACTURING COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE FOR THE PERIOD 2018-2022)
Abstract
Introduction/Main Objectives: arnings quality is vital for investment decisions. This study investigates how the current ratio, return on assets, and debt to equity ratio affect the earnings quality of consumer goods manufacturing companies listed on the Indonesian Stock Exchange from 2018 to 2022. The focus on this sector and period is due to its economic significance and unique financial dynamics. Background Problems: This paper examines the impact of specific financial ratios—current ratio, return on assets, and debt to equity ratio—on earnings quality in consumer goods manufacturing companies. The research question is: How do these financial ratios influence earnings quality? Novelty: This research targets the underexplored Indonesian consumer goods sector, addressing a gap in the literature regarding the impact of these financial ratios on earnings quality within this specific context and time frame. Research Methods: A quantitative approach was used, analyzing data from 50 samples from 10 companies using purposive sampling. Multiple linear regression analysis was performed using IBM SPSS software to examine the relationships between the variables. Findings/Results: The study found that: (1) The current ratio negatively affects earnings quality. (2) Return on assets has no significant effect on earnings quality. (3) The debt to equity ratio negatively affects earnings quality. Conclusion: Liquidity and leverage ratios significantly impact earnings quality, with both the current ratio and debt to equity ratio showing negative effects. These findings suggest that higher liquidity and leverage are associated with poorer earnings quality, highlighting the importance of these ratios for investors in making informed decisions.
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