Citation:

Dini Iskandar, Martalena, Peter Peter*, Shania Augustine. "Investigating Asset Utilization, Profitability, and Solvability, as the Stock Return Factors: Evidence from LQ45 Index Constituents" International Research Journal of Economics and Management Studies, Vol. 3, No. 12, pp. 83-87, 2024.

Abstract:

Investing in stocks needs considerations, such as market liquidity. Without this liquidity, investors find it challenging to buy and sell stocks quickly. In Indonesia, they can choose the stocks of LQ45 index constituents to overcome this situation. When taking this decision, they must consider the related financial ratios. Therefore, this study examines and analyzes the influence of asset utilization, profitability, and solvability as the financial ratio on the stock return of non-financial companies from 2015 to 2022 becoming the LQ45 index. Besides, this study uses simple random sampling to take companies and a regression model with statistical features to check the relationship between each datum of these ratios and this return. After investigating the hypotheses, this study concludes that asset utilization affects stock return positively. Conversely, the debt-to-equity ratio, quantifying solvability, negatively affects this return. Meanwhile, the return on assets to measure profitability does not affect this return. Based on this fact, public investors should buy the stocks when total asset turnover upsurges and the debt-to-equity ratio diminishes.

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Keywords:

Asset Turnover, Debt-To-Equity Ratio, LQ45 Index Constituents, Relative Stock Return, Return on Assets.