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Journal : Indonesia Accounting Research Journal

Impact of Liquidity and Solvency Ratios on Financial Performance: A Comprehensive Analysis Muhammad Fikri; Anisa Putri Yolanda
Indonesia Accounting Research Journal Vol. 11 No. 2 (2023): December: Accounting
Publisher : Institute of Accounting Research and Novation (IARN)

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Abstract

This research delves into the critical analysis of liquidity and solvency ratios and their profound impact on a company's financial performance. The study seeks to explore the relationship between these ratios and their influence on short-term liquidity and long-term solvency, ultimately contributing to decision-making processes for businesses and investors. Through a quantitative approach and cross-sectional design, the research evaluates data sourced from financial statements, annual reports, and databases. It employs statistical techniques, including correlation analysis and regression models, to interpret the relationships between liquidity and solvency ratios and financial indicators. The research also uncovers industry-specific variations in these ratios to provide tailored insights for various sectors. The findings highlight the significance of these ratios in assessing a company's financial health. Strong liquidity ratios, such as the current and quick ratios, were associated with improved short-term financial stability. Simultaneously, lower debt-to-equity ratios and higher interest coverage ratios signaled stronger long-term financial stability. These interrelated ratios were crucial for both businesses and investors, guiding strategic financial planning, risk management, and investment decisions. The practical implications of these findings demonstrate the significance of maintaining balanced liquidity and solvency positions. These insights provide practical guidance for businesses in formulating financial strategies, managing risks, and enhancing investor confidence. For investors, the findings empower more informed decision-making, fostering risk assessment and portfolio diversification. Overall, this research contributes significantly to the field of financial analysis, offering practical implications for businesses and investors. The implications of liquidity and solvency ratios are instrumental in shaping the financial landscape, allowing for more informed, resilient, and strategic decision-making processes for stakeholders in the financial sphere.
Co-Authors Abbas, Dirvi Surya Abid Aprialdi Ade Suryanda Adira Mutiara Jasmine Agung Wibowo Ardiyanta Surbakti Ahmad Junaidi Ajimiliansyah Ajimiliansyah Aminulloh Aminuyati Amri Amir Andriyanto Adhi Nugroho Anisa Dwi Nurfajriah Anisa Putri Yolanda Anna Khumaira Sari Aprianti Lubis Ardra Rianisa Arsyah Salsabilla Aulia Rahman Awansah Azareel Sulistiyanto Jusuf Azhari, Ihsan Bagas Muhammad Husain Davit Rahmadhan Defi Cintia Dewi Desniar - - Dharina Baharuddin Doci Nurmartha Egi Larasati Eni Erlina Entin Oktantia Safitri Erdianto Erdianto Erni Achmad Fadhiil Ahmadi Fadila Lesi Sasri Fahrul Razi Fahrur Riza P. Fahrur Riza Priyana Fanni Jessica Farrah Fadhienie Fasahati Laiya Febrianti, Dwi Rizki Fikarlin Ndruru Firnanda Amalia Geri Rizki Ramadani Gita Arra Hervina Glori Pesta Pince Sitorus Guna Gerhat Sinaga Guntur Alam H Makmur Hafidza Zia Handayani, Lestari Handayani Hesty Ervianni Zulaecha Irwan Putra Ndruru Jaka Rapino Jefry Sunupurwa Asri Joko Samboro Khawarizmi, Muhammad Nur khusnul khotimah Lugas Pasiolo M. Nur Khawarizmi M. Rizky Ismail mas Kismanah Melania Hidayat Muhammad Farras Muhammad Syahril Sodiqin Muhammad Thifaal Dzaki Muhammad Zaki Ananda Nadiyatul Faizah Nanda Afriandi Natasya Fhadyah Azzahra Pepi Putri Utami Pratama Halim Putri Surya Anita Rahmatul Ulya Ramadhani, Siti Refo Elfianza Rena Rahmani Rido Syahputra Rimi Gusliana Mais Rina Anjar Wati Rizkima Akbar S. Rizkima Akbar Setiawan Rometdo Muzawi, Rometdo Roziana Ariffin Rusydi, Muhammad Ilhamdi Sefti Adelia Elian Shelvi Rusdiana Shir Li Wang Sumayyah Dzulkifly Syaoki, Muhammad Syarifuddin TATI NURHAYATI Tedi Rizki Theam Foo Ng Ubaidah Ulfiyah Mei Wisnu Agusna Wisnu Hamka Winata Yulanda Nurul Fadhila