The Mediating Role of Working Capital Turnover in the Relationship Between Liquidity, Solvency, and Profitability in Manufacturing Firms

Abstract

This study investigates the effect of liquidity, solvency, and working capital turnover on the profitability of manufacturing companies in the consumer goods sector listed on the Indonesia Stock Exchange (IDX) for the 2021–2024 period. The research employs a quantitative approach using Partial Least Squares Structural Equation Modeling (PLS-SEM) on secondary data from 108 companies selected through purposive sampling. The results show that liquidity has a positive and significant effect on profitability, while solvency does not directly influence profitability. Working capital turnover exhibits a significant negative effect on profitability and mediates the relationship between both liquidity and solvency toward profitability. These findings suggest that effective liquidity and working capital management can enhance firm performance, while high solvency levels may not always translate to increased profitability. The research provides important insights for corporate financial managers and stakeholders seeking to improve profitability through internal financial strategies, particularly in emerging markets.