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Case Studies | Business Management | Indonesia | Volume 7 Issue 6, June 2018

The Influence of Working Capital and Solvability on Profitability and Firm's Value in the Infrastructure, Utilities and Transportation Sector

Ditta Prissylia | Lukytawati Anggraeni ^[5] | Hendro Sasongko ^[9]

Abstract: The research is conducted to know working capital and solvability to profitability and firms value. The objects used are 21 companies of infrastructure, utility and transportation sectors of Indonesia Stock Exchange in 2010-2016. The hypothesis in this study is using panel data regression. The study aims to explore the effects of working capital and solvabilitas component i. e cash conversion cycles (CCC), current asset to total asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), and degree of financial leverage (DFL) to the firms performance by looking at firms value i. e Tobins Q (TQ) and profitability i. e. net operating profit (NOP). The results shows that CCC has a positive influence on the profitability of the company sector, but having a negative influence on the firms market value. DFL has a positive influence on profitability and firm value. Companies with high CCC scores require higher external financing. Therefore, the importance of managing working capital needs to ensure an increase in the firms value and profitability of the company and strategic thinking in the operational aspects of the company to operate efficiently and effectively.

Keywords: Working capital, Solvability, Profitability, and Tobins Q

Edition: Volume 7 Issue 6, June 2018,

Pages: 1521 - 1526