Background

Every company must manage their financial condition in order to maximize company value. For

company who issue shares in stock market, shares price as indicator value will be affected with a few

fundamental and technical variable that forming market power and affect shares transaction. One of

fundamental information that provided in stock market id financial report, where investor can know any

internal information about company financial work that will be used by investor to decide alternative

choice for buying shared. Fundamental information is an internal factor that comes from financial report

which form like financial ratios, like : Debt Ratio, Price Earning Ratio, EPS, Company size.

All fourth ratio as variable that can predicting industrial shares price changing, because of growth

in non oil and gas industry in 2011 increase at 6.83% from previous year. Like Industrial Minister

statement, this growth is the highest growth since 2005. Contribution from industrial sector in non oil and

gas industry with total national Product Domestic gross incomes attain 20,92 % and the highest compared

with others sector. Industrial company have characteristic relationship with DR, PER, EPS and size with

Industry shares price.

Theoretical Aspect

1. Debt Ratio

To predict shares price with measuring how much company assets that paid by creditor. Bigger DR

will give bigger risk that made by company because show that bigger asset cost to guarantee debt,

uninterested to acquisition. DR= Total DebtTotal Asset

2. Price to earning Ratio

As indicator of how much money that investor spent to get profit. PER can affect shares prices,

smaller PER will get smaller Shares Price. Amount on PER Value that can be used by investor as

indicator and main point in order to make decision related with investing that highly expected Shares

return income. PER= Stock PriceEarning Per Sh are

3. Earning Per Share

Ability of company to produce net profit from every sheet which owned by company shares owner.

For Investor, EPS is information that can be fundamentally thought and useful because it can

describe future prospect of company. EPS is independent Variable that dominant that others

independent variable that affect shares Price.

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per

share serves as an indicator of a company's profitability. When calculating, it is more accurate to use

a weighted average number of shares outstanding over the reporting term, because the number of

shares outstanding can change over time. However, data sources sometimes simplify the calculation

by using the number of shares outstanding at the end of the period.

EPS= Net profitnumber of s h ares outstanding

4. Size

Amount of asset owned by company. Size variable depend on company size, bigger company will get

easier chance to get loan because of big assets value that can become a guarantee and credibility

indicator butt small company only have supporting factor to producing goods in limited amount. This

thing show that firm size effect to shares prospect is insignificant. Size use book value from total

asset or assets total as size proxy. ¿ ln Total Assets

5. Company Value

Is successful management measurement in past prospect and future prospect to ensure shares holder. Company value can show from Shares Market Price. A few quantity variable to predict company value are : 1) Book value per share. Measure shareholder value of all shares. BVS =

shareholder equity/jumlah saham yg beredar 2) Appraisal value. Related with placing cost. Individual activa value have small realtionship with general company ability in producing earning and going concern value from a company. 3) Stock market value. Other approaching to predict net value of business that frequently change. There was three kind of measuring approached related with shares : Book value (shares value depend on emiten book/record), market value (recorded shares value in stock market), and intrinsic value (real value of shares). 4) Chop-shop value. This approaching conceptualized stress practice to buy active or asset in below placing price. 5) Cash flow value, To estimated net cash flow provided for company which providing as merger/acquisition result. This value can be maximum amount that have to be paid by targeted company.

6. Shares

Is one of new fund resource come from company that derivative from capital owner in consequence

company have to give dividend. Shares form like a piece of paper that show paper ownership. There

were 2 factor to influence is Macro (give impact to all shares that enlisted in stock market) & micro

(give impact only to few kind of shares). Other factor : 1) fundamental emiten condition; Direct

relationship factor with emiten performance. Size depend on risk that investor freeposted affected by

emiten fundamental condition (financial condition, emiten company business strategy, produced

goods and management). 2) supply and demand law. As shares price fluctuative stipulation,

increasing shares price because of too much demand or less supply 3) interest rate. Increasing if

interest rate will attract investor to invested because have smaller risk and affect company financial

performance as bank director 4) foreign exchange/currency. Bigger foreign fund invested in indonesia

stock market will show indonesia’s investation condition already condusive. Where economic growth

nothing more negative and indirectly will attract emiten ability to provide good profit. 5) IHSG.

Calculation of transaction that occure on sock market in certain period that used as main point in

reviewing economic conditionand country investation 6) News and Rumor. With both of this thing,

investor can predict condisively.

There were three kind of information that give impact to shares prices like : 1) fundamental, idustry

general condition and company future prospect. 2) technically, economic trading condition, currency

fluctuation and transaction volume, volume and frequence and market power, 3) environment,

economic condition, politic and security, inflation and monetarry right.

Conceptual Model

Hypothetical Model

Methodology

Types of Research

Types of research used in this research is explanatory research with quantitative analysis approach.

Explanatory research is a type of research that explains or clarifies the relationship between two or

more aspects of the situation and phenomena. According Sugiyono (2010:7) that a study using a

quantitative approach to research if the data in the form of figures and statistical analyzes using.

The data used are secondary data

data collection techniques with methods of documentation

Financial Ratio Firm Value

• Method of data analysis used in this study is a method of multiple linear regression statistical

analysis and hypothesis testing. Multiple linear regression analysis was used to determine the

strength of the influence of independent variables to the variable bound together.

• The purpose of hypothesis testing to determine whether there is any correlation between the independent variables and the dependent variable. Testing hypotheses include the F test and t testF test: to see the effect of all independent variables to the dependent variable.T test: to test the partial coefficient of determination of the independent variable dependent variable.

Research Sites

This study took place in the Indonesia Stock Exchange Corner in the Faculty of Economics, University of

Brawijaya Malang.

Variables and Measurement

Independent variable is also called the free variable is a variable that affects or is the cause of the

change or the emergence of bound variable (dependent). Independent variables defined in: 1) Debt

Ratio as X1 2) price to earning ratio as X2. 3) Earning per share X3. 4) size as X4.

the dependent variable is the firm's stock price is measured or peroxide by the closing share price (Y) in

units of dollars.

Analysis and Interpretation Data

table test result of multiple linear regression

VariableUnstandardized Coefficients (B)

t - Calculate Sig. Explanation

constant 1.059      

DR -0,015 -6,3130,000 significant

PER 0,024 9,9450,000 significant

EPS 0,864 22,2500,000 significant

Size 0,156 2,7770,000 significant

R = 0,938

 

R Square = 0,879Adjusted R square = 198,671F - Calculate = 6,39F - Table = 0,000α = 0,05

NB : Total Data : 114t - table value : 1,671Variable Dependent : harga saham

from table test result of multiple linear regression can be concluded that :

1. Taken together the variable of DR (X1), PER (X2), EPS (X3), and Size (X4) give influential

significant on the stock price variable (Y). it can be seen from the calculated F value

showed a value of 198,671 (significant F = 0,000). So calculated F > table F (198,671 >

6,39) or sig F < 5% (0,000 < 0,05).

2. As partially can be known that DR variable have a significant influence on the stock price is

equal to -6,313 for t-test, t-table value as big as 1,671. With amount of t-calculate of variable debt

ratio as -6,313 and the probability of 0,000. So t-calculate > t table (6,313 > 1,671) or sig. t < 5%

(0,000 < 0,005)

3. As partially can be known that PER variable have a significant influence on the stock price is

equal to 9,945 for t-test, t-table value as big as 1,671. With amount of t-calculate of variable debt

ratio as 9,945 and the probability of 0,000. So t-calculate > t table (9,945 > 1,671) or sig. t < 5%

(0,000 < 0,005)

4. As partially can be known that EPS variable have a significant influence on the stock price is

equal to 22,250 for t-test, t-table value as big as 1,671. With amount of t-calculate of variable

debt ratio as -6,313 and the probability of 0,000. So t-calculate > t table (22,250 > 1,671) or sig. t

< 5% (0,000 < 0,005)

5. As partially can be known that DR variable have a significant influence on the stock price is

equal to 2,777 for t-test, t-table value as big as 1,671. With amount of t-calculate of variable debt

ratio as 2,777 and the probability of 0,000. So t-calculate > t table (2,777 > 1,671) or sig. t < 5%

(0,000 < 0,005)

So, we can get the regression equation that Y = 1,059 – 0,015 X1 + 0,024X2 + 0,864X3 + 0,156X4

Conclusion and Recommendation

Purpose of this research is to understand effect of DR, PER, EPS, Size stimultaneously with

shares prices in industrial company that enlisted in BEI and knowing dominant variable who give impact

on shares prices to indusrial company that enlisted at BEI. With the research result, we can conclude that:

1) Test of F where F count show value 198,671 significant F=0,000. So F count > F table

(198,671>6,39)or Sig F < 5% (0,000 < 0,05). The influence of the four independent variables

simultaneously with stock price can be seen in Adjusted R square as 0,875 means that together with

other four variable to give the impact 87,5 % for stock prices. From the experiment result, 1st

hypothetic stated that DR variable, PER, EPS and size simultaneously give significant impact to stock

market, can be accepted.

2) Experiment result that have done partially can be seen that Earning Per Share (EPS) variable has

biggest impact that other four independent variable that give impact to stoch prices. Those statement

proven with amount of one count value EPS variable as much as 22,250 that have the biggest vallue

other than three variables and smallest probability value 0,000. From experiment, hypothetic that

stated that all four independent variables, variable EPS have dominan impact to stock price.

Suggestion

With the conclution of this research, suggestions that we given are :

1) Industrial companyy have to increase financial management withincreasing financials ratio like PER,

EPS, Size and DR so the company stock prices in stock market increase. Research result shor=w that

PER, EPS and high DR that lower will responded nicely by investor in stock market so this thing can

change stock price in stock market increase.

2) For the investor or investor candidate suggested to carefully undersand fundamental factor or

companies finacial ratios before decide to investing in those company. Research result show that

fundamental factor that can be measurement before investing in Industrial company that enlisted in

BEI is DR, PER, EPS and size.

3) For researcher, we suggested that to increase amount of research year to be more than three years so

the shares fluctuation based on fundamental factor impact like DR, PER, EPS and size can describe

the real condition.

Additional info :

1. Financial ratios are categorized according to the financial aspect of the business which the ratio

measures. Liquidity ratios measure the availability of cash to pay debt.[2] Activity ratios measure

how quickly a firm converts non-cash assets to cash assets.[3] Debt ratios measure the firm's

ability to repay long-term debt.[4] Profitability ratios measure the firm's use of its assets and

control of its expenses to generate an acceptable rate of return.[5] Market ratios measure investor

response to owning a company's stock and also the cost of issuing stock.

2.Saham Preference : Saham yang memberikan hak lebih di atas saham biasa, seperti hak prioritas

atas pengembalian modal jika perusahaan dilikwidasi, hak prioritas atas pembagian deviden, serta

hak prioritas untuk mengajukan usul dalam rapat umum pemegang saham untuk pencalonan

direksi dan komisaris.

3.Analisis regresi linier berganda adalah hubungan secara linear antara dua atau lebih variabel

independen (X1, X2,….Xn) dengan variabel dependen (Y). Analisis ini untuk mengetahui arah

hubungan antara variabel independen dengan variabel dependen apakah masing-masing variabel

independen berhubungan positif atau negatif dan untuk memprediksi nilai dari variabel dependen

apabila nilai variabel independen mengalami kenaikan atau penurunan. Data yang digunakan

biasanya berskala interval atau rasio.

Persamaan regresi linear berganda sebagai berikut: Y’ = a + b1X1+ b2X2+…..+ bnXn

Y’ = Variabel dependen (nilai yang diprediksikan)

X1 dan X2 = Variabel independen

a = Konstanta (nilai Y’ apabila X1, X2…..Xn = 0)

b = Koefisien regresi (nilai peningkatan ataupun penurunan)

4. Share : The stock of a corporation is partitioned into shares, the total of which are stated at the

time of business formation. Additional shares may subsequently be authorized by the existing

shareholders and issued by the company. In some jurisdictions, each share of stock has a certain

declared par value, which is a nominal accounting value used to represent the equity on the

balance sheet of the corporation. In other jurisdictions, however, shares of stock may be issued

without associated par value.

Shares represent a fraction of ownership in a business. A business may declare different types

(classes) of shares, each having distinctive ownership rules, privileges, or share values.

Ownership of shares may be documented by issuance of a stock certificate. A stock certificate is a

legal document that specifies the amount of shares owned by the shareholder, and other specifics

of the shares, such as the par value, if any, or the class of the shares.

5.Two classes of corporate stock shares are fundamentally different: common stock and preferred

stock. Here are two basic differences:

Preferred stockholders are promised (but not guaranteed) a certain amount of cash dividends each

year, but the corporation makes no such promises to its common stockholders. Each year, the

board of directors must decide how much, if any, cash dividends to distribute to its common

stockholders.

Common stockholders have the most risk. A business that ends up in deep financial trouble is

obligated to pay off its liabilities first, and then its preferred stockholders. By the time the

common stockholders get their turn, the business may have no money left to pay them.

Neither of these points makes common stock seem too attractive. But consider the following points:

Preferred stock shares usually are promised a fixed (limited) dividend per year and typically don’t

have a claim to any profit beyond the stated amount of dividends. (Some corporations issue

participating preferred stock, which gives the preferred stockholders a contingent right to more than

just their basic amount of dividends.)

Preferred stockholders generally don’t have voting rights, unless they don’t receive dividends for one

period or more. In other words, preferred stock shareholders usually do not participate in electing the

corporation’s board of directors or vote on other critical issues facing the corporation.

The main advantages of common stock, therefore, are the ability to vote in corporation elections and

the unlimited upside potential: After a corporation’s obligations to its preferred stock are satisfied, the

rest of the profit it has earned accrues to the benefit of its common stock.

Taking a closer look at common stock

Here are some important things to understand about common stock shares:

Each stock share is equal to every other stock share in its class. This way, ownership rights are

standardized, and the main difference between two stockholders is how many shares each owns.

The only time a business must return stockholders’ capital to them is when the majority of

stockholders vote to liquidate the business (in part or in total). Other than this, the business’s

managers don’t have to worry about losing the stockholders’ capital.

A stockholder can sell his or her shares at any time, without the approval of the other stockholders.

However, the stockholders of a privately owned business may agree to certain restrictions on this

right when they first became stockholders in the business.

Stockholders can put themselves in key management positions, or they may delegate the task of

selecting top managers and officers to the board of directors, a small group of persons selected by

stockholders to set the business’s policies and represent stockholders’ interests.

The all-stocks-are-created-equal aspect of corporations is a practical and simple way to divide

ownership, but its inflexibility can be a hindrance, too. Suppose the stockholders want to delegate to

one individual extraordinary power, or to give one person a share of profit out of proportion to his or

her stock ownership. The business can make special compensation arrangements for key executives

and ask a lawyer for advice on the best way to implement the stockholders’ intentions.

Nevertheless, state corporation laws require that certain voting matters be settled by a majority vote

of stockholders. If enough stockholders oppose a certain arrangement, the other stockholders may

have to buy them out to gain a controlling interest in the business. The limited liability company legal

structure permits more flexibility in these matters.

6. A share is a small part of a company that you can buy for a set price. Share prices can move up or

down in value, depending on the performance of the stock market, the current profitability of the

company and the expected future profitability or potential of the company. The aim is to invest in

shares that increase in value over time. When you buy shares you become a shareholder in that

company.

There are several ways you can invest in the stock market:

You can buy shares in companies that are traded on the stock market.

You can invest in a basket of shares through an exchange traded fund (ETF).

You can invest indirectly in the stock market through certain investments such as pooled

investments where some of your money is invested in shares or indices of shares. Examples of

pooled investments are unit-linked funds.

You may also receive a dividend, which is a sum of money paid out of the company's profits to

shareholders. Buying shares involves choosing companies that have the best potential to grow

profits. It also means choosing business sectors that have the best growth potential.

Benefits - you can potentially earn a good return on your investment from selling shares that have

gone up in value since you bought them. You may also benefit from any dividends the company

you have invested in may pay. Remember, you will have to pay tax on both your profits and your

dividends.

Risks - if your shares fall in value you can lose a lot of money when you come to sell them. Share

prices can rise or fall quickly, which makes them more volatile and risky. So, ask yourself if you

can afford to take a risk with all or some of your money.