THE EFFECT OF ROTING WORKING CAPITAL, LEVERAGE,

COMPANY SIZE AND CAPITAL STRUCTURE ON PROFITABILITY

(Empirical study on the food and beverage sub-sector on the Indonesia Stock
Exchange for the period 2015-2019)

Via Safitri1, Edi Joko Setyadi2

S1 Accounting Study Program / Faculty of Economics and Business
Muhammadiyah University Purwokerto
Viasafitri17@gmail.com1 , ej_setyadi@yahoo.co.id2

ABSTRACT
This study aims to find empirical evidence of the effect of working capital
turnover, leverage, company size and capital structure on profitability. The sample
in this study is the food and beverage sub-sector companies listed on the
Indonesia Stock Exchange in 2015-2019 using the positive sampling method and
obtained 24 companies as samples with 93 observational data. The data analysis
technique used is multiple linear regression analysis with the SPSS 20 test tool.
The results of this study indicate that working capital turnover has a negative
effect on profitability, firm size has a positive effect on profitability, leverage has
a negative effect on profitability, capital structure has a negative effect on
profitability.
Keywords : Working Capital Turnover, Leverage, Company Size, Capital
Structure.
THE EFFECT OF ROTING WORKING CAPITAL, LEVERAGE, COMPANY
SIZE AND CAPITAL STRUCTURE ON PROFITABILITY
(Empirical study on the food and beverage sub-sector on the Indonesia Stock
Exchange for the period 2015-2019)

Via Safitri1, Edi Joko Setyadi2

S1 Accounting Study Program / Faculty of Economics and Business
Muhammadiyah University Purwokerto
Viasafitri17@gmail.com1 , ej_setyadi@yahoo.co.id2

ABSTRACT
This study aims to find empirical evidence of the effect of working capital
turnover, leverage, company size and capital structure on profitability. This study
sample is the food and beverage sub-sector companies listed on the Indonesia
Stock Exchange in 2015-2019 using the positive sampling method and obtained
24 companies as samples with 93 observational data. The data analysis technique
used is multiple linear regression analysis with the SPSS 20 test tool. This study
indicates that working capital turnover has a negative effect on profitability, firm
size has a positive effect on profitability, leverage has a negative effect on
profitability, capital structure has a negative effect on profitability.
Keywords: Working Capital Turnover, Leverage, Company Size, Capital
Structure.
 PRELIMINARY
Profitability is the company's ability to be able to generate profits by using
the sources owned by the company such as assets, capital or company sales
(Sudana, 2011). The level of profitability can show how well the management of
the company is managed, the higher the profitability of a company, the more
information is likely to be disclosed because it wants to show the public and
stakeholders that the company has high profitability compared to other companies
in the same industry.(Setianingsih and Setyadi, 2014)
Factors that affect profitability include working capital turnover, leverage,
company size and capital structure. One of the factors that influence profitability
is working capital. Capital used in company activities is also known as working
capital, according to (Ghassani, 2020). Working capital is a fund or asset that is
needed in the company's day-to-day activities. Due to the need for daily activities,
working capital is the company's investment in various short-term activities, such
as cash, accounts receivable, and inventory.
Another factor that affects profitability is the size of the company. The size of
the company is a picture of the size of a company which is shown by the total
assets owned by the company. Companies that have a larger firm size have a
strong incentive to present a high level of profitability compared to smaller firms
because larger firms are researched and viewed more critically by investors. The
bigger the company size, the greater the profitability that the company gets
(Ambarwati et al, 2015).
The next factor that affects profitability is leverage according to (Putra and
Badjra, 2015) Leverage is a ratio that measures how much debt is measured in
company spending. The use of debt in corporate financing activities does not only
have an impact on the company. If the proportion of Leverage is not considered,
the company will cause a decline in profitability because the use of debt can cause
fixed interest expenses.
In signal theory theory states that good quality companies will deliberately give a
signal to the market, thus the market is expected to differentiate between good and
bad quality companies. In order for the signal to be good, it must be captured by
the market and perceived as good and not easily imitated by companies that have
poor quality (Eksandy and Dewi, 2018).
Pecking order theory states that profitable companies prefer internal funding
to external funding. This is because when the leverage is high, the profitability
obtained will decrease and vice versa if the leverage decreases, the profitability
obtained by the company will increase. Companies with very high returns on
investment use relatively little debt. A high rate of return allows companies to do
most of their funding through internally generated funds (Wella and Putra, 2015).
The difference between this study and previous research is that the object
under study and adding one independent variable, namely leverage, the reason for
adding the leverage variable is because in previous studies Sari and
Purwohandoko, (2019), Pratiwi and Ardini, (2019), Puspita and Hartono, (2018)
shows the results that leverage has a negative effect on profitability. Previously,
researchers conducted research on Real Estate and Property companies listed on
the IDX in 2012-2016, while in this study using objects in the food and beverage
sub-sector manufacturing companies listed on the IDX in 2015-2019.
Based on the phenomenon and background that has been described, the
researcher is interested in taking the title "The Effect of Working Capital
Turnover, Leverage, Company Size and Capital Structure on Profitability in Food
and Beverage Companies Listed on the IDX in the 2015-2019 Period"
FORMULATION OF THE PROBLEM
Based on the description in the background of the problem above, the problem in
this study can be formulated as follows:
1. Does working capital turnover have a positive effect on profitability?
2. Does leverage have a negative effect on profitability?
3. Does company size have a positive effect on profitability?
4. Does the capital structure have a positive effect on profitability?
LITERATURE REVIEW
1. Signaling Theory (Signal Theory)
Signal theory states that good quality companies will deliberately provide signals
to the market, thus the market is expected to differentiate between good and bad
quality companies. In order for the signal to be good, it must be captured by the
market and perceived as good and not easily imitated by companies with poor
quality (Eksandy and Dewi, 2018).
2. Profitability
Profitability is the ability to measure a company in generating a profit by using its
sources such as assets, capital and company sales (Supriyadi and Yuliani, 2015).
Meanwhile, according to Puspita and Hartono (2018) Profitability is the
company's ability to generate profits during a certain period. So from some of the
existing understanding, it can be concluded that profitability is very important for
the company. And if the level of profitability at the company is increasing
continuously or is stable from year to year, it can illustrate that the condition of
the company can be said to be good.

FRAMEWORK

Figure 2.1

Framework

Working Capital Turnover

H₁ (+)
X1
 H₂ (-)Leverage

X2 Profitability
Y
H₃ (+)
Company size
X3
H₄ (+)

Capital Structure
X4

HYPOTHESIS
H1 = Working capital turnover has a positive effect on profitability.
H2 = Leverage has a negative effect on profitability.
H3 = Firm size has a positive effect on profitability.
H4 = Capital structure has a positive effect on profitability.
PNELITIAN METHOD
The sample used in this research is manufacturing companies in the food and
beverage sub-sector using a purposive sampling method, namely companies that
have certain conditions by publishing financial reports for four years and being
listed on the IDX during the 2015-2019 period. The criteria applied in sampling
include:
1. Food and beverage sub-sector manufacturing companies listed on the Indonesia
Stock Exchange and the respective companies' websites during the 2015-2019
research period.
2. Food and beverage sub-sector companies that published incomplete financial
reports as of December 31, 2015-2019.
3. Food and beverage sub-sector companies that have complete information
required in this study.
DATA ANALYSIS ENGINEERING
Data analysis was performed using descriptive statistical test analysis,
multiple linear regression analysis, hypothesis testing, determination coefficient
test (R2), f test and t test. Before testing the hypothesis, first the classic
assumption test is carried out, namely the normality test, multicollinearity test,
and heteroscedasticity test, auticorrelation test.
Multiple Linear Regression Analysis
Multiple regression analysis is used to analyze the effect of several
independent variables on the dependent variable together (Ghozali, 2016).
The regression equation is as follows:
Prof = α + β₁Pmk + β₂Lev + β₃Up-β₄Sm + e
Information :
Y: Profitability
α: Constant
Pmk: Turnover of working capital
Lev: Leverage
Up: Company Size
Sm: Capital Structure
β₁- β₄: Regression coefficient
e: error
F test
According to Ghozali (2011), the goodness of fit test (model feasibility
test) was carried out to measure the accuracy of the sample regression function in
interpreting the actual value statistically. The feasibility test of this model can be
measured from the F statistical value which explains whether all the independent
variables included in this have a joint influence on the dependent variable. The
test criteria that will be used in this study are as follows:
1. Pvalue <0.1 indicates that this model test is suitable for use in research.
2. Pvalue> 0.1 indicates that this model test is not suitable for use in research.
Determination Coefficient Test (R2)
The coefficient of determination (R2) in essence measures how far the
model's ability to apply variations in the dependent variable (Ghozali, 2016). The
coefficient of determination is between zero or one. The Adjusted R-square value
can increase or decrease if one independent variable is added to the model. The
value of R2 shows how much the regression model is able to explain the
dependent variable.
Partial Test (t Statistical Test)
The t statistical test is used to determine the effect of each independent
variable (X) on the dependent variable (Y). The t test can be done by looking at
the significant probability value t of each variable contained in the t output of the
regression results using SPSS. The following formulations were used (Ghozali,
2016).

RESULTS AND DISCUSSION

1. Analysis Test Results
a. Descriptive Statistical Analysis
Table 4.4
Descriptive statistics
Std.
N Minimum Maximum Mean Deviation
WCT 90 -14.92 165.63 8,5227 19,94571
DAR 90 00.08 2.90 0.4640 0.34555
UP 90 24.49 32.20 28,4440 1,60105
 DER 90 -2.13 3.34 0.8259 0.72209

ROA 90 -0.10 0.61 0.0908 0.12253

Valid N 90
(listwise
)
Source: SPSS Output Results (2021)
b. Normality test
Table 4.5
Before Normality Test Results in Casewise

One-Sample Kolmogorov-Smirnov Test

Unstandardized
Residual

N 90
Mean 0.0000000
Normal Parametersa, b
Std. Deviation 0.11180057
Absolute 0.177
Most Extreme Differences Positive 0.177
Negative -0.101
Kolmogorov-Smirnov Z 1,680
Asymp. Sig. (2-tailed) 0.007

Table 4.5.1
Casewise Diagnostic
Case Std. Predicte
Number Residual ROA d Value Residual
5 3,401 , 61 , 2210 , 38905
46 3,017 , 43 , 0849 , 34511
47 3,655 , 53 , 1119 , 41811

Table 4.5.2
After Normality Test Results in Casewise

One-Sample Kolmogorov-Smirnov Test

Unstandardized
Residual
N 87
Mean 0.0000000
Normal Parametersa, b
Std. Deviation 0.08121524
Absolute 0.142
Most Extreme Differences Positive 0.142
Negative -0.085
Kolmogorov-Smirnov Z 1,326
Asymp. Sig. (2-tailed) 0.059
 Based on the results that have been tested for normality, the results are
obtained again Asymp. Sig. (2-tailed)The table above is 0.059, it can be
concluded that the research data is normally distributed, because of the
Asymp value. Sig. (2-tailed)> 0.05.
Table 4.6
Multicollinearity Test Results
Collinearity Statistics
Model
Tolerance VIF
1 (Constant)
WCT 0.947 1,056
0.981 1,019
UP 0.982 1,018
DER 0.952 1,051
From the multicollinearity test results above, the independent
variable has a VIF value <10.Based on the table 4.5 above, it shows that
there is no multicollinearity symptom in this study because the overall
test results have a tolerance value> 0.1 and a VIF value <10.

Table 4.7
Heteroscedasticity Test Results

Model t Sig.
1 (Constant) 1,543 0.127

WCT -1,870 0.065

DAR -0.166 0.868
UP -1,154 0.252

DER 1,876 0.064

 Based on the results of the heteroscedasticity test, it can be seen that
the test shows the value of Sig. The variable WCT (working capital
turnover) is 0.065, DAR (Leverage) is 0.868, UP (company size) is
0.252, DER (capital structure) is 0.064. It can be concluded that
heteroscedasticity does not occur because the Sig value is> 0.05.
Table 4.8
Autocorrelation Test Results

Std. Error
Adjusted of the Durbin-
Model R R Square R Square Estimate Watson
1 0.482a 0.233 0.195 0.08317 0.740
Based on the results of table 4.7, the autocorrelation test can be analyzed
by looking at Durbin - Waston at 0.740, so it shows that the research data
is free from autocorrelation symptoms because the DW value is between -
2 to +2. Then the data can be used as a basis for conducting research.
Table 4.9
Multiple Linear Regression Test Results

Unstandardized Standardized
Model Coefficients Coefficients
Std.
B Error Beta t Sig.
1 (Constant) -, 242 0.160 -1,514 , 134
WCT -0.001 0,000 -0,221 -2,228 0.029
DAR -0.081 0.029 -0.276 -2,831 0.006
UP 0.013 0.006 0.233 2,384 0.019
DER -0.016 0.014 -0,116 -1,168 0.246

Based on table 4.8, it can be seen that the regression equation that is formed is as
follows:
ROA = -0.242 - 0.001WCT - 0.081DAR + 0.013UK - 0.016DER + e
Table 4.10
Result of Determination Coefficient Test (R2)

Adjusted R Std. Error of

Model R R Square
Square the Estimate

1 0.482a 0.233 0.195 0.08317

Adjusted R square of 0.195 means that the profitability variable is only

explained 19.5% by the working capital turnover, leverage, company size
and capital structure variables. The R2 figure of 0.195 shows that the
dependent variable is only explained a little by the independent variable,
this is because the R2 number is far from 1. Meanwhile, 0.805 or 80.5% of
 the profitability variable is explained by another variable in the asset
structure, sales killings.
Table 4.11
Model Feasibility Test Results
Sum of Mean
Model Squares df Square F Sig.
1 Regression 0.172 4 0,043 6,218 0,000b

Residual 0.567 82 0.007

Total 0.739 86

From table 4:10, the value statistically shows a significant result at α =

0.05, which is equal to 0.000, which means that the significance value is
<0.05. This shows that simultaneously the independent variables working
capital turnover, leverage, company size, and capital structure have an
influence on the dependent variable profitability.
Table 4.12
Partial Test Result (t test)
Coefficientsa

Standardize
Unstandardized d
Coefficients Coefficients

Std.
Model B Error Beta t Sig.

1 (Constant -0,210 0.114 -1,846 0.068

)

WCT -0.001 0,000 -0.153 -1,737 0.086

DAR -0.092 0.021 -0,380 -4,353 0,000

UP 0.012 0.004 0.271 3,115 0.003

A. DER -0.030 0.010 -0,262 -2,948 0.004

DISCUSSION
1. First Hypothesis Testing Results
In table 4.11, it can be seen that the results of testing the working capital
turnover hypothesis show that the value of 1 (working capital turnover) is
negative at -0.001 and the significant value of the working capital turnover
variable is 0.029 which means <0.05 so that Ho is accepted and Ha is
rejected. So it can be concluded that working capital turnover has no
positive effect on profitability, thus the first hypothesis which states that
working capital turnover has a positive effect on profitability, is rejected.
 This research is in line with Eksandy and Dewi (2018) and shows a
significant value of 0.029 which means <0.05 with β β 4 -0.001 which is
towards the negative,. Because with an increase in working capital
turnover, there will be a decrease in profitability, as well as a decrease.
2. Second Hypothesis Testing Results
Table 4.11 shows that the results of the leverage hypothesis testing show that
the value of β2 (Leverage) is negative at -0.081 and the significant value of
the leverage variable is 0.006, which means <0.05 so that H0 is rejected and
Ha is accepted, it can be concluded that leverage has a negative effect on
profitability. . Thus, the second hypothesis which states that leverage has a
negative effect on profitability is accepted.
This research is in line with Pratiwi and Ardini (2019) because when
leverage is high, the profitability obtained will decrease and vice versa if the
leverage decreases, the profitability obtained by the company will increase.
Companies with very high returns on investment use relatively little debt. A
high rate of return allows companies to do most of their funding through
internally generated funds (Wella and Putra, 2015).
3. Third Hypothesis Testing Results
Table 4.11 shows that the results of testing the firm size hypothesis show
that the value of β3 is positive 0.013 and the significant value of the company
size variable is 0.019 which means <0.05 so that H0 is rejected and Ha is
accepted, it can be concluded that company size has a positive and significant
effect on profitability. . Thus, the third hypothesis which states that firm size
has a positive effect on profitability is accepted.
This means that companies that have large company sizes tend to be
more trusted by investors than companies that have small company sizes.
This research is in line with Kusumo and Darmawan (2018) because large
total assets can be used to fulfill company operations in generating profits. If
the company can maximize the use of assets properly, it will have an impact
on increasing its profitability. So that the increase is a good signal for
investors in investment(Pratiwi and Ardini, 2019).
4. Fourth Hypothesis Testing Results
Table 4:11 shows that the results of testing the capital structure hypothesis
show value β 4negative value of -0.016 and a significant value of the capital
structure variable of 0.246 which means> 0.05 so that Ho is accepted and
Ha is rejected, it can be concluded that the capital structure has no positive
effect on profitability. Thus, the fourth hypothesis which states that capital
structure has a positive effect on profitability is rejected.
The results of this study are in lineShaputri and Wibowo (2016) predict
that if the capital structure increases, it will not be followed by an increase
in profitability, because the higher the capital structure used by the
company, the higher the level of use of funds for company performance so
that the capital structure ratio does not affect profitability. .
CONCLUSIONS AND SUGGESTIONS
The conclusions that can be drawn from this research are:
1. Turnover of working capital has a negative effect on profitability.
2. Leverage negative effect on profitability.
3. Company size has a positive effect on profitability.
4. Capital structure has no effect on profitability.
Based on the conclusions that have been described, the author tries to suggest
suggestions that might be useful, including:
1. Further researchers are advised to increase the number of samples used,
so that it is expected to better describe the conditions of the food and
beverage sub-sector companies in Indonesia.
2. Further research is also suggested to add other independent variables that
may affect profitability.
3. Adding sources of information or references used as material for
profitability research.

BIBLIOGRAPHY

Ambarwati, A., Slamet, B., & Ellyn, O. (2019). the influence of accounts
receivable turnover, capital structure and automotive sub-sector companies
and components listed on the Indonesian stock exchange (bei) in 2013-
2017) Ayu Ambarwati Budiman Slamet. 1–20.
Anggarsari, L., Aji, S., & Tony. (2018). The Influence of Company Size,
Leverage, Liquidity, Working Capital Turnover and Sales Growth on
Profitability (Goods and Consumption Industry Sectors Listed on the
Indonesia Stock Exchange 2013-2016 Period). Journal of Management
Science (JIM), 6 (4), 542–549.
Brigham, E, F and Houston. 2014. Basics of Financial Management. Book Two,
Eleventh Edition, Ali Akbar Yulianto's Translation, Publisher Selemba
Empat: Jakarta
Eka Pratiwi, A., & Ardini, L. (2019). The Effect of Working Capital Turnover,
 Company Size, Leverage and Accounts Receivable Turnover on
Profitability. 16.
Eksandy, A. (2018). The Effect of Working Capital Turnover, Accounts
Receivable Turnover and Cash Turnover on Company Profitability (Studies
in Infrastructure Sector Construction Companies on the Indonesia Stock
Exchange Period 2012 - 2015). Journal of UMT Dynamics, 2 (2), 1–14.
Fahmi, I. (2013). Financial Performance Analysis (1st ed.). Bandung: Alfabeta
Felany, IA, & Worokinasih, S. (2018). The effect of working capital turnover,
leverage and liquidity on profitability (study of food and beverage sub-
sector companies listed on the Indonesia Stock Exchange in 2012-2016).
Journal of Business Administration, 58, No 2, 119–128.
Ghozali, Imam. 2016. Multivariete Analysis Application with IBM SPSS 23
Program (8th Edition). VIII printing. Semarang: Diponegoro University
Publishing Agency.
Ghassani, 2020. The effect of working capital turnover, leverage, and company
size on profitability in textile and garment companies.
Idx. (2020). Annual financial reports. https://www.idx.co.id/per company-
tercatat/leport-keuangan-dan-tahunan/. (accessed November 2020)
Iskandar, T., Dp, E., & Darlis, E. (2014). The Effect of Working Capital
Turnover, Capital Structure and Liquidity on the Profitability of Industrial &
Chemical Companies in the Indonesia Stock Exchange. Online Journal of
Students of the Faculty of Economics, University of Riau, 1 (2), 3341
Jumingan. 2011. Financial Statement Analysis. Jakarta: PT Bumi Aksara.

Kartikasari, D., & Merianti, M. (2016). The effect of leverage and firm size to
profitability of public manufacturing companies in Indonesia. International
Journal of Economics and Financial Issues, 6 (2), 409–413.
Kasmir, 2015. Financial Statement Analysis. Edition 1 Printing 8. Jakarta:
Rajawali Pres
Katadata. (2020). Sluggish public consumption has hit the performance of
consumer companies.https:
//katadata.co.id/nazmi/analdata/5e9a57afa440e/lesunya-kumsi-masyarakat-
yang-memukul-kinerja-per company-konsumer (accessed February 15,
2020).
cash (2019). The food and beverage industry is still experiencing growth in the
third quarter of 2019. https://industri.kontan.co.id/news/industri-makanan-
dan-minuman- still-mengalami-pertentuk-di-kuartal-iii-2019.( accessed on
30 October 2019)
Martono and H. Agus. 2002. Financial Management. Econisia Publishers.
Yogyakarta.
Meidiyustiani, R. (2016). Effect of Working Capital, Company Size, Sales
Growth, and Liquidity on Profitability in Manufacturing Companies.
Journal of Accounting and Finance, 5 (2), 131–143.
Munawir, S. 2012. Financial Statement Analysis. Liberty. Yogyakarta
Pangestuti, Cholifia Dwi Agustin. 2016. The Effect of Working Capital Turnover,
Company Size, Operating Leverage, and Financial Leverage on
Profitability. Journal of Management Science and Research Volume 5,
Number 7
Putra, A., & Badjra, I. (2015). The Effect of Leverage, Sales Growth and
Company Size on Profitability. E-Journal of Management of Udayana
University, 4 (7), 249411.
Pradnyanita Sukmayanti, NW, & Triaryati, N. (2018). Effect of Capital Structure,
Liquidity and Company Size on Profitability in Property and Real Estate
Companies. E-Journal of Management of Udayana University, 8 (1), 172.
Puspita, DA, & Hartono, U. (2018). The Effect of Working Capital Turnover,
Company Size, Leverage and Liquidity on the Profitability of Animal Feed
Companies on the IDX 2012-2015. Journal of Management Science, 6 (1),
1–8.
Rahmawati, I., & Mahfudz, MK (2018). Analysis of the Influence of Working
Capital Turnover, Liquidity, Capital Structure, Sales Growth, Asset
Structure, Size on Profitability. Diponegoro Journal Of Management, 7 (4),
1–14.
Santoso, Singgih. 2012. Complete Guide to SPSS Version 20. Jakarta: PT Elex
Media Komputindo.

Santoso, SB, Astuti, HJ, & Sayekti, LM (2020). The Effect of Claim Expense,
Liquidity, Risk-Based Capital, Company Size, Debt to Equity, and Debt To
Asset on Profitability In Indonesia Islamic Insurance Companies.
Setianingsih, T., & Setyadi, EJ (2014). The Effect of Leverage, Profitability, and
Firm Size on Company Csrd in Manufacturing Companies in the Consumer
Goods Sector Listed in Bei (2010-2013). Compartment, XII (1), 1–16.
Sugiyono. 2017. Quantitative, Qualitative, and R & D Research Methods.
Bandung:
Alfabeta, CV.
Sugiyono. 2017. Quantitative, Qualitative, and R & D Research Methods.
Bandung:
 Alfabeta, CV.
Sari, NY, & Purwohandoko. (2019). The Influence of Working Capital, Leverage,
Liquidity, and Firm Size on the Profitability of the Goods and Consumption
Industry Sector. Journal of Management Science, 7 (3), 740–751.
Supriyadi, U., & Yuliani. (2015). Effect of WTC, QR, and DER on ROA in the
Food and Beverage Industry. Management of Indonesian Entrepreneurs
Vol., 44 (1).
Sudana, IM (2011). Corporate Financial Management Theory & Practice. In
Erlangga.
Suryaputra, G., & Christiawan, J. (2014). The Effect of Working Capital
Management, Sales Growth and Company Size on Profitability in Property
and Real Estate Companies Listed on the Indonesia Stock Exchange (BEI)
2010-2014.
Wibowo, A., & Wartini, S. (2012). Efficiency of Working Capital, Liquidity and
Leverage on Profitability in Manufacturing Companies on the IDX. Journal
of Accounting, 3 (1), 49–58.