Abstract
Managers who are responsible for the management of companies are faced with two important decisions - investment and funding. The right investment decisions and choice of funding sources are important because they affect the company's financial performance. The selection of the types of assets to be invested and the right types of financing sources result in optimal returns for the company. It reflects good company performance and future prospects. In addition, optimal return is a good sign for investors. Companies that perform well experience increase in the value of their firm. This study examined the effect of investment decisions and the selection of appropriate sources of funds on the performance of the company and the consequent impact on the firm value. The study was conducted in two parts. The first part examined the effect of investment decisions on long-term assets with long-term funding on the rate of return and firm value. The second part examined the effect of investment decisions on the company's short-term assets and funding for financial performance and firm value. The case study used in this research is a consumer goods sub-sector company listed on the Indonesia Stock Exchange in the period 2010 to 2017. Path analysis is the data analysis tools that was used. The results of data analysis showed that the asset structure has an effect on financial performance and firm value. The capital structure affects the financial performance but does not affect the firm value of the company. Financial performance was measured by ROI.
Highlights
Firm value is the investor's expectation of the company which is measured by the company's stock price
The hypotesis of the argument is: H4: Capital structure has a positive effect on financial performance
Financial performance uses the indicator return on investment, while the firm value uses the price to book value indicator (Ross, 2002)
Summary
Firm value is the investor's expectation of the company which is measured by the company's stock price. Harjito & Martono (2013:5) state that a company's investment decisions are reflected in the types of assets the company invested in This is mostly seen on the assets section of the financial statement of the company which shows what makes up current assets as well as the fixed assets. Companies must be able to find efficient funding sources This happens when the company has an optimal capital structure that can minimize capital costs and maximize the firm value. The financial ratio data of the consumer goods industry sector for the last seven years shows that the average investment in fixed assets has only reached 32%. The debt to total assets ratio is around 41%, the average net profit margin is 9.5%, 27% ROI and 5.3 PBV This condition shows that opportunities for growth in this sector are still quite large. The first part discusses the introduction, section two discusses literature review, section three discusses research methodology and data processing, section four discusses the results of research while the fifth section discusses conclusions and suggestions
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