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All Journal Smart Society: Community Service and Empowerment Journal
Andre Arsy Subagja
Universitas Telkom, Indonesia
Humanities Education Languange, Linguistic, Communication & Media Social Sciences Other

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Liquidity, Profitability, and Operating Cash Flow: Their Association with Financial Performance in Indonesia's Food and Beverage Subsector Andre Arsy Subagja; Hilda Salman Said
Smart Society Vol. 6 No. 3 (2026): Smart Society
Publisher : FOUNDAE (Foundation of Advanced Education)

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.58524/9w8fp582

Abstract

This study investigates how liquidity, profitability, and operating cash flow relate to the financial performance of food and beverage subsector firms on the Indonesia Stock Exchange (IDX-IC) between 2019 and 2024. A purposive sampling procedure yielded a balanced panel of 52 firms (312 firm-year observations), analyzed in EViews 13 through panel regression with two-way clustered standard errors to correct for heteroskedasticity, serial correlation, and cross-sectional dependence. Model-selection tests pointed to the common effect model (CEM) for the main specification, with fixed effect (FEM) and random effect (REM) models serving as robustness checks. Jointly, the three variables are associated with financial performance (Adjusted R² = 0.543; F = 124.19, p < 0.001). At the partial level, only profitability (ROE) shows a positive link, significant at the 10% threshold (β = 0.151, p = 0.085); liquidity and operating cash flow show no significant association. The profitability association held up directionally, and mostly stayed significant, across robustness checks using an alternative profitability measure (gross profit margin), winsorized data, and alternative panel specifications. Overall, profit-generating capacity tracks financial performance more consistently than short-term liquidity or cash generation in this subsector. The study adds subsector-specific evidence on which financial indicators matter most for food and beverage firms, and points company management toward prioritizing profitability, alongside broader indicators such as gross profit margin, without neglecting liquidity and cash flow discipline.
Co-Authors Hilda Salman Said