Analysis of Common Size and Financial Ratios in Assessing Company Performance in Property and Real Estate Companies Listed on the Indonesia Stock Exchange
Introduction
The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed across various sectors, including property and real estate. The property and real estate sector is a significant contributor to the country's economy, and the performance of companies in this sector can have a substantial impact on the overall market. Therefore, it is essential to analyze the financial performance of property and real estate companies listed on the IDX to understand their strengths and weaknesses.
Background
This study aims to measure the financial performance of property and real estate companies listed on the IDX during the period 2010 to 2012. In this study, three companies out of a total of 44 registered companies were selected, namely PT. Bakrieland Development Tbk., PT. Ciputra Development Tbk., and PT. Intiland Development Tbk. The method used in the company's financial performance analysis is common size analysis and financial ratio. The data used were obtained from the annual reports of the three companies, including the balance sheet, income statement, and financial ratio. The data collected is secondary data.
Methodology
The methodology used in this study involves two main methods: common size analysis and financial ratio analysis. Common size analysis allows us to understand the company's income and expense structure by converting numbers in financial statements to a percentage. For example, in the income statement, each item can be stated as a percentage of total income. This helps in comparing financial performance between companies, even though they have different sizes.
Financial ratio analysis is a tool used to evaluate the financial performance of a company in various aspects. In this study, several ratios that might be used include profitability, liquidity, and solvency ratios. Profitability ratios, such as net profit margins, indicate how effective the company generates profits from its income.
Common Size Analysis
Common size analysis allows us to understand the company's income and expense structure by converting numbers in financial statements to a percentage. For example, in the income statement, each item can be stated as a percentage of total income. This helps in comparing financial performance between companies, even though they have different sizes.
Through this analysis, it appears that PT. Ciputra Development Tbk. and PT. Intiland Development Tbk. Successfully maintaining a high profit margin, which shows that they are able to manage operational costs effectively. This is a significant finding, as it indicates that these companies are able to generate profits from their income, even in a challenging market environment.
Financial Ratio Analysis
Financial ratio analysis is a tool used to evaluate the financial performance of a company in various aspects. In this study, several ratios that might be used include profitability, liquidity, and solvency ratios. Profitability ratios, such as net profit margins, indicate how effective the company generates profits from its income.
The results of the analysis showed that PT. Ciputra and PT. Intiland has increased in this ratio, which reflects a good business strategy and supporting market conditions. Conversely, PT. Bakrieland Development Tbk. experienced a decrease in the ratio of profitability and suffered a significant loss. This may be caused by various factors, including market instability and management that are less efficient, which results in higher expenses compared to the income generated.
Conclusion
Based on the results of this study, it can be concluded that PT. Ciputra Development Tbk. and PT. Intiland Development Tbk. Having good financial performance during the period 2010 to 2012, indicated by increasing profit and healthy profit margins. Conversely, PT. Bakrieland Development Tbk. experienced a significant decline in performance.
Common size analysis and financial ratio provide a clear picture of the relative performance of each company and help investors in making better decisions in investing in the property and real estate sectors in Indonesia. Thus, understanding of this analysis becomes crucial for stakeholders, including investors, company management, and other interested parties.
Recommendations
Based on the findings of this study, the following recommendations can be made:
Investors should consider the financial performance of property and real estate companies listed on the IDX before making investment decisions.
Company management should focus on improving their financial performance by implementing effective business strategies and managing operational costs effectively.
Regulators should monitor the financial performance of property and real estate companies listed on the IDX to ensure that they are operating in a fair and transparent manner.
Limitations
This study has several limitations, including:
The study only analyzed the financial performance of three companies out of a total of 44 registered companies listed on the IDX.
The study only analyzed the financial performance of these companies during the period 2010 to 2012.
The study did not consider other factors that may affect the financial performance of these companies, such as market conditions and management efficiency.
Future Research Directions
Future research should consider the following directions:
Analyzing the financial performance of a larger sample of companies listed on the IDX.
Analyzing the financial performance of these companies over a longer period of time.
Considering other factors that may affect the financial performance of these companies, such as market conditions and management efficiency.
Conclusion
In conclusion, this study provides a comprehensive analysis of the financial performance of property and real estate companies listed on the IDX during the period 2010 to 2012. The study used common size analysis and financial ratio analysis to evaluate the financial performance of these companies. The results showed that PT. Ciputra Development Tbk. and PT. Intiland Development Tbk. Having good financial performance during the period 2010 to 2012, indicated by increasing profit and healthy profit margins. Conversely, PT. Bakrieland Development Tbk. experienced a significant decline in performance.
The study provides several recommendations for investors, company management, and regulators. The study also highlights the importance of understanding the financial performance of property and real estate companies listed on the IDX to make informed investment decisions.Frequently Asked Questions (FAQs) about Common Size and Financial Ratio Analysis in Assessing Company Performance in Property and Real Estate Companies Listed on the Indonesia Stock Exchange
Q: What is common size analysis?
A: Common size analysis is a method of financial analysis that involves converting numbers in financial statements to a percentage. This helps in comparing financial performance between companies, even though they have different sizes.
Q: What are financial ratios?
A: Financial ratios are tools used to evaluate the financial performance of a company in various aspects. They can be used to measure profitability, liquidity, and solvency, among other things.
Q: What are the benefits of using common size analysis and financial ratio analysis?
A: The benefits of using common size analysis and financial ratio analysis include:
Comparing financial performance between companies of different sizes
Evaluating the financial health of a company
Identifying areas for improvement in a company's financial performance
Making informed investment decisions
Q: How can common size analysis and financial ratio analysis be used to assess company performance?
A: Common size analysis and financial ratio analysis can be used to assess company performance by:
Analyzing the income statement and balance sheet to identify trends and patterns
Calculating financial ratios to evaluate profitability, liquidity, and solvency
Comparing financial performance between companies to identify areas for improvement
Q: What are some common financial ratios used in assessing company performance?
A: Some common financial ratios used in assessing company performance include:
Net profit margin
Return on equity (ROE)
Return on assets (ROA)
Current ratio
Debt-to-equity ratio
Q: How can investors use common size analysis and financial ratio analysis to make informed investment decisions?
A: Investors can use common size analysis and financial ratio analysis to make informed investment decisions by:
Analyzing the financial performance of companies in the property and real estate sector
Evaluating the financial health of companies
Identifying areas for improvement in a company's financial performance
Comparing financial performance between companies to identify the best investment opportunities
Q: What are some limitations of common size analysis and financial ratio analysis?
A: Some limitations of common size analysis and financial ratio analysis include:
The study only analyzed the financial performance of three companies out of a total of 44 registered companies listed on the IDX.
The study only analyzed the financial performance of these companies during the period 2010 to 2012.
The study did not consider other factors that may affect the financial performance of these companies, such as market conditions and management efficiency.
Q: What are some future research directions for common size analysis and financial ratio analysis?
A: Some future research directions for common size analysis and financial ratio analysis include:
Analyzing the financial performance of a larger sample of companies listed on the IDX.
Analyzing the financial performance of these companies over a longer period of time.
Considering other factors that may affect the financial performance of these companies, such as market conditions and management efficiency.
Q: What are some practical applications of common size analysis and financial ratio analysis?
A: Some practical applications of common size analysis and financial ratio analysis include:
Evaluating the financial health of a company
Identifying areas for improvement in a company's financial performance
Making informed investment decisions
Comparing financial performance between companies to identify the best investment opportunities.
Q: What are some common mistakes to avoid when using common size analysis and financial ratio analysis?
A: Some common mistakes to avoid when using common size analysis and financial ratio analysis include:
Not considering other factors that may affect the financial performance of a company, such as market conditions and management efficiency.
Not analyzing the financial performance of a company over a sufficient period of time.
Not comparing financial performance between companies to identify areas for improvement.
Q: What are some best practices for using common size analysis and financial ratio analysis?
A: Some best practices for using common size analysis and financial ratio analysis include:
Analyzing the financial performance of a company over a sufficient period of time.
Considering other factors that may affect the financial performance of a company, such as market conditions and management efficiency.
Comparing financial performance between companies to identify areas for improvement.
Using multiple financial ratios to evaluate a company's financial health.