Liquidity Ratios and Solvency Ratios Their Impact on Profit Performance of Manufacturing Companies
Textile and Garment Subsectors Listed on the Indonesia Stock Exchange (IDX) 2020-2024
Abstract
Profit growth is a key indicator of a company’s financial performance and sustainability. In
manufacturing industries, particularly the textile and garment subsector, effective financial management is
essential to maintain stable profit growth amid dynamic economic conditions. This study aims to examine the
effect of liquidity and solvency ratios on profit growth in textile and garment manufacturing companies listed
on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. This research employs a quantitative
approach using secondary data obtained from the annual financial statements of 10 selected companies,
resulting in 50 observations collected through purposive sampling. Liquidity is measured using the Current
Ratio, while solvency is proxied by the Debt-to-Equity Ratio (DER). Data analysis techniques include
descriptive statistics, classical assumption tests, multiple linear regression analysis, and hypothesis testing
using t-tests, F-tests, and the coefficient of determination (R²). The empirical results indicate that neither
liquidity nor solvency ratios individually exhibit a statistically significant influence on profit growth.
Furthermore, when tested simultaneously, these financial ratios do not significantly explain variations in profit
growth. The coefficient of determination shows that liquidity and solvency ratios account for only 11.6% of
the variation in profit growth, suggesting that other factors play a more dominant role. From a managerial
perspective, these findings imply that decision-makers should not rely solely on liquidity and solvency
indicators when formulating strategies to enhance profit growth. Instead, managers are encouraged to
consider additional factors such as operational efficiency, cost control, market conditions, and strategic
investment decisions to achieve sustainable profitability.
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