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Abstract
Indonesian financial services authority require each of the company must state Current Ratio (CR), Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin (NPM), earnings per share (EPS), Debt to Asset Ratio (DAR), Debt to Equity Ratio (DER) into its financial statements. The aim is to facilitate investors in understanding and comparing financial performance between companies. According to signal theory, companies will intentionally give investors signals in the form of financial information ratios to show that their company is better than other companies. Companies with excellent financial ratio performance will experience an increase in demand for shares. Increasing demand for these stocks will result in higher share prices. By using the panel data regression method this study resulted that not all financial ratios required by the publication by the financial services authority could affect the stock price. Only CR and EPS can affect stock prices.
Keywords: Financial Ratio, LQ45 index, Stock Price
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1. Introduction
The Indonesia Stock Exchange (IDX) classifies various indexes to facilitate investors in choosing shares from various listed companies. Like the LQ 45 index, this index contains 45 stocks that have the most considerable capitalisation value. Stock capitalisation indicates how much the liquidation of the shares. According to IDX regulations, shares included in the LQ 45 index must meet several criteria. First, shares must enter the top 60 of the total 12-month market transactions. Second, stock capitalisation must be above 90% market capitalisation. Third, it has been listed on the Indonesia Stock Exchange for at least three months. Fourth, the company's financial situation and growth prospects. With these four criteria, shares included in the index are considered to be very profitable and have good prospects and are safe because stocks in the LQ 45 index will continue to be reselected every six months. Historically, the LQ 45 index share price has an upward trend, which proves that the index can be used as a reference to choose the best stocks on the IDX.
In addition to determining stocks through available indices, stocks need to be chosen by comparing performance between companies. An analysis is needed so that companies can be projected into numbers to compare performance between companies. Projecting a company into numbers...