Profit Persistence, Potential Profit, and Capital Structure Effects on Profit Quality in Chemical Manufacturing Firms

Abstract

This study investigates the impact of profit persistence, potential profit, and capital structure on profit quality within chemical subsector manufacturing companies listed on the Indonesia Stock Exchange. Utilizing purposive sampling methodology, 13 companies were examined through secondary data from quarterly financial statements. Profit persistence and potential profit were measured through earnings-based ratios, capital structure through the Debt to Equity Ratio (DER), and profit quality through the operating cash flow to net profit ratio. Multiple linear regression analysis reveals that profit persistence and potential profit demonstrate no significant effects on profit quality, whereas capital structure exhibits a significant negative influence. Simultaneous testing confirms the collective significance of all independent variables. These findings provide critical insights for financial reporting quality assessment and stakeholder decision-making processes in Indonesia's chemical manufacturing sector.