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International Journal of Advanced Research in Management and Social Sciences
Year : 2016, Volume : 5, Issue : 8
First page : ( 130) Last page : ( 144)
Online ISSN : 2278-6236.

The effect of return on asset, current ratio, price to earning ratio, and stock price on sustainable growth rate of firms in business-27 index and Sri Kehati Index in Indonesia Stock Exchange

Khatin Kholisma N.*, Anjaswara Billy*, Dr. Utami Siti Rahmi**

*Green Economy Program of Study, Surya University, Indonesia

**Lecturer, Green Economy Program of Study, Surya University, Indonesia

Online published on 20 May, 2017.

Abstract

The objectives of this research are to examine the effect of current ratio, return on asset, price to earning ratio, and stock priceon the sustainable growth rate of the firms in Indonesia Stock Exchange. We also compare the mean value of dividend payout ratio, sustainable growth rate, return on asset, current ratio, price to earning ratio, and stockprice of firms listed in Sri Kehati Index and Business 27 Index.

Our research uses two indices that consists of Kehati Sustainable and Responsible Investment Index (Sri-Kehati) and Business 27 Index. Sri Kehati Index represented the sustainable firm, and Business 27 Index as a benchmark index. Data have been collected from the Indonesia Stock Exchange within period 2011–2014. We use regression test and t-test to analyze the data. Regressionanalysis is to test the hypotheses 1, 2, 3 and 4, and for testing hypothesis 5 we use t-test to determine whether there is significant difference between mean value of variable of two indices.

From the regression test and t-test we can conclude that for firms listed in Sri Kehati Index, stock price has positive and significant effect on Sustainable Growth Rate (SGR), Return on Asset (ROA) has negative and significant effect on SGR, price to earning ratio(PER) has negative insignificant effect on SGR, and current ratio (CR) has positive insignificant effect on SGR. For firms listed in Business 27 Index, we can show that the stock price has positive and significant effect on SGR, ROA has positive insignificant effect on SGR. PER has negative insignificant effect on SGR, and CR has negative significant effect on SGR. The mean value of CR of firms in Sri-Kehati Index and mean value of firms in Business 27 Index are significantly different, whereas the mean value of ROA, PER, and SGR of firms in Sri-Kehati Index and mean value of firms in Business 27 Index are insignificantly different.

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Keywords

Return on Asset, Price to Earning Ratio, Current Ratio, Sustainable Growth Rate, and Stock Price.

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