The Influence of Production Cost and Working Capital on Profitability with Firm Size as a Moderating Variable

Abstract

This research aims to examine how production cost and working capital affect profitability, and also to investigate whether firm size can moderate the influence of production cost and working capital on profitability. Observation data amounting to 110 entries, obtained from 10 textile subsector companies listed on the Indonesia Stock Exchange (IDX) during the period 2012-2022, were extracted from the companies’ annual reports. Moderated Regression Analysis (RMA) was used to analyze the data. The findings show production cost has a negative but not significant impact, while working capital has a positive but not significant impact on profitability. The findings also show firm size does not moderate the effect of either production cost or working capital on profitability. The implication of these findings are that production cost and working capital, under certain conditions, cannot be used as the main factors for determining profitability. Furthermore, firm size similarly cannot be used as a primary reference for enhancing profitability.