The Effect of Debt To Equity Ratio (DER) and Net Profit Margin (NPM) on Return on Equity (ROE) at PT. Kalbe Farma Tbk, During the Period 2013-2024.

Abstract

A company's financial performance can be evaluated through various ratios, one of which is the solvency ratio and the profitability ratio. Return on Equity (ROE) is one of the important ratios in assessing company performance, especially in measuring the company's ability to generate profits for shareholders based on its equity. Return on Equity (ROE) functions as an indicator of profitability as well as efficiency in the use of equity. The higher the Return on Equity (ROE), the greater the rate of return received by shareholders on their investment. This study aims to analyze the effect of Debt to Equity Ratio (DER) and Net Profit Margin (NPM) on Return on Equity (ROE) at PT Kalbe Farma Tbk for the period 2013–2024. The main focus of the study is to determine how much influence the Debt to Equity Ratio (DER) and Net Profit Margin (NPM) have on Return on Equity (ROE), both partially and simultaneously. The study population was taken from the financial statements of PT Kalbe Farma Tbk for the period 2013–2024. The research approach used is descriptive and associative, with the help of SPSS software version 25. The results of the analysis show that the Debt to Equity Ratio (DER) has a very strong and significant influence on Return on Equity (ROE) with a contribution of 73.2%, while Net Profit Margin (NPM) has an influence of 46.9%. Simultaneously, both variables have a very strong relationship to Return on Equity (ROE) with a positive direction of 79.7%. The resulting regression equation model is: ROE = –627.031 + 0.528 DER + 0.976 NPM