The Effect of Capital Adequacy Ratio, Non Performing Loan, and Loan to Deposit Ratio on the Profitability

Authors

  • Sinta Melinda Institut Bisnis dan Informatika Kesatuan
  • Tri Marlina Institut Bisnis dan Informatika Kesatuan

Keywords:

NPL

Abstract

Banking has an important role to improve the economy of a country. The banking sector has the potential and
opportunity that is very large in its application as a source of funds and financing for the public and business
entities. Therefore to answer the challenge every company should be able to show the performance of good
company and have a mature strategy in the entire field. The Bank must be managed well in order to earn profits
and avoid losses, because losses that occur can affect the level of health and financial performance of banks.
Assessment of financial performance in the banking sector can use a variety of financial ratios as a measure to
make it easier to know the financial condition of being faced by the company. This study aims to investigate: the
effect of CAR (Capital Adequacy Ratio) on ROA (Return on Assets), the effect of NPL (Non Performing Loan)
on ROA (Return on Assets), and the effect of LDR (Loan to Deposit Ratio) on ROA (Return on Assets), and the
simultaneous effects of CAR (Capital Adequacy Ratio), NPL (Non Performing Loan), and LDR (Loan to Deposit
Ratio) on ROA (Return on Assets) in banks listed in the Indonesian Stock Exchange (IDX) in 2016-2019. In
partially the result showed that CAR (Capital Adequacy Ratio) has a positive and significant effect on ROA
(Return on Assets), while NPL (Non Performing Loan), and LDR (Loan to Deposit Ratio) has negative and
significant effect on ROA (Return on Assets). In simultaneously CAR (Capital Adequacy Ratio), NPL (Non
Performing Loan), and LDR (Loan to Deposit Ratio) has positive and significant effect on ROA (Return on
Assets).

Keywords:

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Published

2021-12-25