The effect of debt to equity ratio and current ratio to return on equity
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Abstract
The purpose of this study is to determine the effect of debt to equity ratio (DER) and current ratio (CR) on return on equity (ROE). Case study at PT. Bukit Asam Tbk, which is listed on the Indonesia Stock Exchange (IDX). The research design is with a quantitative approach, using secondary data sources with a ratio data scale. The unit of analysis is the company's financial statements for the eight reporting periods from 2015-2022, explored and analyzed in 32 quarters, selected with a purposive sampling approach. The data analysis method was used with classical assumption test, correlation test, calculation and analysis of the determination coefficient model, and multiple linear regression model test, as well as hypothesis test by applying t-test and F-test, using the SPSS v.26 program. The findings show that the DER and CR have a very weak correlation with ROE. Statistically, it was concluded that DER and CR simultaneously had only a very small contribution to ROE, where ROE was affected by many other factors that are not studied. As a result, the ROE variance is highly unlikely to be explained by DER and CR in this study. The findings of the study also concluded that DER and CR had no effect on ROE, either partially or simultaneously. The results of this study did not succeed in proving all the hypotheses proposed, namely, H1, H2 and H3.
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