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August 16, 2025Open Access

Controlling variable indirect WCTO as the mediating variable against ROE

Key Points

WCTO has a significant indirect effect on ROE, while current ratio does not impact ROE directly.
The analysis used path analysis on financial data from 8 companies during 2019-2023.
A declining trend in average sales was observed, though early signs of sector growth are emerging.
Findings suggest that understanding these relationships may help improve financial strategies in the industry.

Abstract

This study aims to examine the direct and indirect effect of current ratio and working capital turn over (WCTO) dan return on Equity (ROE), with WCTO serving as a mediating variable , pharmaceutical sub sector company list on the Indonesia Stock Exchange (IDX) during the 2019-2023 period. The Research adopts a quantitative approach using secondary data in the form on annual financial statements. The sample was selected using purposive sampling resulting in 40 data point from 8 companies. The analytical method use is path analysis support by 25 software. During the observation method, average sales in pharmaceutical sub sector industry show a declining tren leading to decrease in both profit and working capital. However data also indicate the beginning of the new growth in this sector. Therefore this study was conducted in the response to these on emerging patterns. The result show that WCTO has significant indirect effect on ROE while the current ratio doesnot have a direct impact on ROE Keywords: Path Analysis; CR; WCTO; ROE; Finance

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