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THE EFFECT OF GROWTH OPPORTUNITY, NET WORKING CAPITAL, AND LEVERAGE ON PROFITABILITY IN NON- CYCLICALS CONSUMER SECTOR COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE IN 2019-2023

Abstract

Within volatile economic environments, enterprises operating in the consumer staples sector encounter obstacles in upholding financial performance, notwithstanding the inelastic nature of product demand. Determinants such as expansion potential, liquidity management through net working capital, and capital structure optimization remain pivotal for preserving operational efficiency, market positioning, and bottom-line profitability. This study aims to: (1) investigate the effect of growth opportunities on profitability within the Indonesian Stock Exchange’s (IDX)consumer non-cyclical sector (2019–2023); (2) quantify the effect of net working capital on bottom-line performance; (3) examine the role of financial leverage in driving or hindering profitability; and (4) examine the simultaneous effect of growth, liquidity, and leverage on the profitability of the targeted industry participants. The population includes consumer non-cyclical enterprises publically traded on the IDX throughout the 2019–2023 period. A sample of 72 financial reports was curated via judgmental sampling, ensuring the inclusion of entities that met specific research requirements. To facilitate the hypothesis testing, the study employed multiple linear regression analysis.
The results reveal that: growth opportunity and leverage are not significant predictors of profitability within the sampled firms, as their respective significance values (0.431 and 0.589) fail to meet the 5% threshold. Conversely, net working capital is identified as a critical determinant of financial performance (p < 0.05). Despite the insignificance of individual variables, the global F-test indicates that growth opportunity, net working capital, and leverage simultaneously influence profitability to a significant degree. The conclusion of this study is that growth opportunity has no effect on profitability. Conversely, net working capital is identified as a positive determinant of financial performance. From a systemic perspective, the integration of growth prospects, net working capital, and leverage collectively accounts for a significant variance in the profitability of consumer non-cyclical firms.