Financial Leverage and Profitability as Determinants of Liquidity in Indonesian Food and Beverage Firms

Subhan Nur Azmi; Ika Maherta Sutadji; Purwo Atmojo

doi:10.63922/ijebir.v5i05.5913

Subhan Nur Azmi Accounting Study Program, Faculty of Economics and Business, Universitas Balikpapan, Balikpapan, East Kalimantan, Indonesia
Ika Maherta Sutadji Accounting Study Program, Faculty of Economics and Business, Universitas Balikpapan, Balikpapan, East Kalimantan, Indonesia
Purwo Atmojo Accounting Study Program, Faculty of Economics and Business, Universitas Balikpapan, Balikpapan, East Kalimantan, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i05.5913

Keywords: Debt-to-Equity Ratio, Return on Equity, Net Profit Margin, Current Ratio, Food and Beverage Companies

Abstract

This study examines the effects of the Debt-to-Equity Ratio (DER), Return on Equity (ROE), and Net Profit Margin (NPM) on the Current Ratio (CR) of food and beverage companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2024 period. Previous studies have reported inconsistent findings regarding the relationships between capital structure, profitability, and corporate liquidity, indicating an unresolved empirical gap. This study addresses this gap by simultaneously investigating the effects of leverage and profitability indicators on liquidity using recent financial data from Indonesian food and beverage companies in the post-pandemic period. A quantitative explanatory research design was employed using purposive sampling, resulting in 52 companies with 208 firm-year observations. Secondary data obtained from annual financial statements were analyzed using multiple linear regression with SPSS version 26. The findings reveal that Debt-to-Equity Ratio, Return on Equity, and Net Profit Margin each have a significant effect on the Current Ratio. These findings support Pecking Order Theory by demonstrating that firms' financing preferences and profitability influence their liquidity management decisions. This study contributes to the corporate finance literature by providing updated empirical evidence regarding the determinants of liquidity among Indonesian food and beverage companies under post-pandemic economic conditions.

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