Analysis of Capital Structure and Non Performing Loans on Financial Performance in the Activity Management Unit (UPK) of Boyolali District in 2022-2023

Ervin Irchani (Universitas Slamet Riyadi, Surakarta, Indonesia)
Edi Wibowo (Universitas Slamet Riyadi, Surakarta, Indonesia)
Dewi Saptantinah Puji Astuti (Universitas Slamet Riyadi, Surakarta, Indonesia)

Journal of International Accounting, Taxation and Information Systems
Vol. 2 No. 1 (2025): February

This research investigates how Debt-to-Equity Ratio (DER), Equity Ratio (ER), Non-Performing Loans (NPL), and Loan Loss Provision (LLP) impact the financial performance, as measured by Return on Assets (ROA), in Activity Management Units (UPK) located in Boyolali Regency. A method of purposive sampling was employed to choose 15 UPKs from various regions within the district. Data analysis employed classical assumption tests and hypothesis testing through F-tests, t-tests, and R-square analysis. Results reveal that while Debt-to-Equity Ratio and Equity Ratio individually do not significantly affect financial performance, Non-Performing Loans and Loan Loss Provision demonstrate significant individual effects. Collectively, all four variables significantly influence Return on Assets, explaining 40.2% of financial performance variation. The study suggests improving credit analysis quality and loan write-off processes while highlighting the need for future research with extended timeframes and broader geographic samples.