Leverage as a Moderator of Profitability in Textile and Garment Companies in Indonesia

Zulkifli Zulkifli; Cynthia Sari Dewi; Syifa Hanifa Salsabil; Apriliana Putri

doi:10.55927/ajabm.v4i4.611

Authors

Zulkifli Zulkifli Pembangunan Jaya University
Cynthia Sari Dewi Pembangunan Jaya University
Syifa Hanifa Salsabil Pembangunan Jaya University
Apriliana Putri Pembangunan Jaya University

DOI:

https://doi.org/10.55927/ajabm.v4i4.611

Keywords:

Debt to Equity Ratio, Leverage, Profitability, Return on Assets, Total Assets Turnover

Abstract

This study aims to examine the effect of Total Asset Turnover (TATO) on Return on Assets (ROA) and evaluate the role of the Debt-to-Equity Ratio (DER) as a moderating variable in the relationship between TATO and ROA in textile and garment companies listed on the Indonesia Stock Exchange (IDX) during the 2020-2022 period. This research employs a quantitative approach using secondary data obtained from audited annual financial statements during the observation period. The analysis is conducted using panel data regression methods with the Eviews 12 application. The study results indicate that TATO and DER partially have a negative and significant impact on ROA. An increase in TATO without a corresponding rise in profitability can lead to a decline in ROA. Meanwhile, a high DER reflects a company's heavy reliance on debt, leading to increased interest expenses and reduced profitability. Furthermore, DER does not play a significant role as a moderating variable in the relationship between TATO and ROA. This finding suggests that the debt-to-equity structure does not directly influence the efficiency of total asset utilization in generating sales, which ultimately affects changes in ROA.

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