The Effect of Profitability, Solvency, and Liquidity Ratios on Financial Performance: The Moderating Role of Firm Size at PT XL Axiata Tbk (2019–2024)

Sovia Friska Engliani Siagian (), Aremi Evanta Tarigan, Enda Noviyanti Simorangkir, Rasinta Ria Ginting and Ayang Pratama
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Sovia Friska Engliani Siagian: Universitas Prima Indonesia, PUI Finance and Sociotechnopreneurship
Aremi Evanta Tarigan: Universitas Prima Indonesia, PUI Finance and Sociotechnopreneurship
Enda Noviyanti Simorangkir: Universitas Prima Indonesia, PUI Finance and Sociotechnopreneurship
Rasinta Ria Ginting: Universitas Prima Indonesia, PUI Finance and Sociotechnopreneurship
Ayang Pratama: Universitas Prima Indonesia, PUI Finance and Sociotechnopreneurship

A chapter in Proceedings of the International Conference on Economics, Business, Management and Accounting (ICEBesMA 2025), 2025, pp 300-313 from Springer

Abstract: Abstract This study explores the influence of profitability, solvency, and liquidity ratios on the financial performance of PT XL Axiata Tbk, one of Indonesia’s leading telecommunication companies, during the period of 2019–2024. The research further examines the moderating role of firm size in the relationship between these financial ratios and corporate performance. This topic is motivated by the need to understand how internal financial structures contribute to a company’s sustainability, particularly in dynamic and competitive industries such as telecommunications. The study adopts a quantitative approach using secondary data obtained from audited annual financial statements of PT XL Axiata Tbk. The analysis employs the Partial Least Squares Structural Equation Modeling (PLS-SEM) technique to test the validity, reliability, and significance of the relationships among variables. The findings indicate that liquidity ratio has a positive and significant effect on the company’s financial performance, whereas profitability and solvency ratios show no significant influence. Furthermore, firm size does not moderate the relationship between any of the three financial ratios and financial performance. These results imply that maintaining strong liquidity management plays a crucial role in ensuring operational stability and enhancing stakeholder confidence, while profitability and solvency alone are insufficient predictors of financial success. Theoretically, the study contributes to the existing body of knowledge by expanding empirical evidence on financial performance determinants in the Indonesian telecommunication sector. Practically, it suggests that management should prioritize cash flow and liquidity efficiency to support business resilience and growth.

Keywords: Profitability Ratio; Solvency Ratio; Liquidity Ratio; Financial Performance; Firm Size (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-960-5_23

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DOI: 10.2991/978-94-6463-960-5_23

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