CHAPTER IINTRODUCTION
1.1 Background IssuesIn this era of free trade, international financial mobility changes and the sooner it will affect all aspects of life including Accounting and Finance. For us in Indonesia, this phenomenon would not want, like it or not we have experienced.With the advance development of the business world, competition among companies is increasing. To be able to survive in the business world every company should be - careful in making decisions, especially financial decisions. This is caused by the failure or success of the business nearly largely determined by the quality of decisions related to finance.To be able to make good decisions required of a company's financial information are available on time, can be traced to the truth, clear, complete, and accurate. In this case the company will prepare a financial report which may illustrate the overall results of the company's activities at the end of accounting period. The financial statements were prepared in order to provide information about the results of operations, financial position, and the various factors that cause changes in financial position of the various parties concerned with the existence of the company, both internally and externally the company.For parties - parties concerned can obtain adequate and accurate information we need to hold different interpretations of financial statements. In analyzing and interpreting financial statements is concerned, then used the method - a particular method that has been standardized. In general, in analyzing the financial statement ratio analysis was used which consisted of liquidity ratios, solvency, profitability, and activities.The results of the analysis is very important for company leaders to control the policies - policies that have been taken well before the financial condition, current and future in order to run the company's operations and assist in taking various decisions that must be implemented as soon as possible for the purpose of the enterprise may achieved.Every year the company's financial position will continue to change in accordance with company operations, as well as the assets are used, especially on fixed asset investment, which is basically the number and value always increased from year to year. This is intended to enhance overall company performance. However, do not rule out the number and value decreased due to the unfavorable corporate activity or other unfavorable conditions such as country of residence that is less conducive economy.Besides a few things that have been mentioned before, another thing that concerns me are the fixed assets investment for which absorbs most of the capital invested in the company, even in some particular case is a must in the company because without it the process of production assets would not be possible to walk. Fixed assets are often referred to as "the earning assets," namely the real assets generate revenue for the company, therefore the fixed assets is what provides the basis for the "earning power" of the company.Based on the above description, the writer interested to do research with the title:"THE EFFECT OF FINANCIAL PERFORMANCE UNDER THE TOTAL RETURN ON INVESTMENT AND ASSET TURNOVER OF FIXED ASSETS INVESTMENT"
1.2 Identification of ProblemsBased on the above background, the authors formulate several problems as follows:1. How is the condition of the company's financial performance through analysis of Return On Investment and Total Asset Turnover at the company2. How does the rate of change during the company's fixed assets investment in the operationalization of the company running3. How much influence the financial performance based on Return On Investment and Total Asset Turnover to changes in fixed assets investment in the company
1.3 Research Objectives1.3.1 Research PurposeThe intent of research conducted by the author is analyzing the financial statements and its influence on the addition of fixed assets investment.
1.3.2 Research ObjectivesThe purpose of this study are:1. To find out the company's financial performance through analysis of Return On Investment and Total Asset Turnover at the company.2. To determine the rate of change in the company's fixed assets investment during the operation of the company running.3. To determine the level of influence of financial performance based on Return On Investment and Total Asset Turnover to changes in fixed assets investment in the company.
1.4 Research PurposeThe author expects that this research can be useful for parties - parties concerned, it can affect the practical usefulness and theoretical.
1.4.1 Practical UsefulnessThe usefulness of the results of research by the authors are as follows:
1. For authors• To broaden the horizon of thought in terms of accounting, particularly the effect of financial statement analysis to the addition of Fixed Assets.• As one of the requirements for the comprehensive exam session S1 Accounting2. For companiesThis research is expected to provide benefits as well as a useful input in implementing company policies in the financial sector, especially in analyzing financial statements.
1.4.2 Usability for Development StudiesThe result is expected to become inputs for the development of science-related disciplines of economics, especially accounting.
Thought 1.5 frameworkIn financial reporting there were two important reports have been prepared by the accountant at the end of the period for a company. Both reports are consolidated balance sheets and income statements. Balance is a report that shows the approximate property, debt, and capital of the company. While the income statement presents the revenues and costs - the cost of a company.The financial statements describe the financial condition and results of operations of a company at a particular moment or period of time. Accordingly the financial statements are an important source of information for the users of financial statements in order to making economic decisions. According to Sofyan Syafri Harahap (1999:17) in his book Critical Analysis of Financial Statements, presents users of financial statements as follows:"Investors need to assess the financial statements will likely reinvest (investment) or withdraw funds (divestment) of the company"The financial statements will become more useful for making economic decisions, if those financial statements with information to predict what will happen in the future. With further processing of financial reports through the process of comparison, evaluation and anlisis trends, will be obtained predictions about what might happen in the future.Analysis of financial reports is a review of the relationship and the tendency to find out whether the financial condition and results of operations of the company's financial progress satisfactory or not. The analysis was done by measuring the relationship between element - the element of financial statements and how to change the element - the element that from year to year to determine the direction of development.Analysis of financial statements according to Bernstein (1983:3), quoted by Sofyan Syafri Harahap in his book "Critical Analysis of Financial Statements are:"Analysis of the financial statements include the application of methods and analytical techniques to the financial statements and other data to see the report it's size - the size and certain relationship that is very useful in decision-making process"
Arimportant ti ratio analysis of financial statements according to Bambang Riyanto (1995:327) in his book Fundamentals of Expenditure Company is:"To be able to get a picture of a company's financial development is necessary we entered the interpretation or analysis of financial data from the companies concerned"
In general, in analyzing the financial statement ratio analysis is used which typically consists of liquidity ratios, solvency, profitability, and the activities of the companies concerned1. Liquidity ratiosLiquidity ratio describes the company's ability to complete the term ability pendeknya.Likuiditas intended as a comparison between the amount of cash and other assets that can be equated with cash in one hand with the amount of debt on the other hand (liquidity of a business entity), also with the expenditure - expenditure to carry out companies on the other (the company's liquidity)2. Solvency ratiosThe solvency ratio describes the company's ability to pay long-term liabilities or obligations - obligations if the company liquidated.3. Ratios - Profitability ratiosProfitability illustrates the comparison between the earnings of assets or capital with which to produce such profits.4. Ratio - the ratio of activityThe ratio of activities intended to measure how much the effectiveness of a company working on the source - the source of the funds.According to Bernstein (1983) cited by Sofyan Syafri Harahap (2004:197) in his book Critical Analysis of Financial Statements, the objective analysis of the financial statements are:"The analysis was performed with an analytical view of financial statements in order to select possible investment or merger"The definition of investment according to Mulyadi (1997: 248) in his book Management Accounting are as follows:"Investment is defined as a Relying sources in the long run to produce profits in the future"The company invested by different reasons. For some companies investing activities is an important element of enterprise operations and enterprise performance assessment may be largely, or wholly dependent on the results reported on these activities. In general have the right financial investment, most tangible investments such as land, buildings, gold, diamonds or other commodities that can be marketed.Total funds invested in fixed assets are not equal in number during the accounting period or during the life of fixed assets. The amount of funds tied up in fixed assets will be gradually reduced in accordance with depreciation method used.Funds invested in fixed assets such as funds invested in current assets is also undergoing a process of rotation. In fact there is no conceptual difference between the investment in fixed assets investment in current assets.The Company entered into short-term investments is the hope that the company will be able to recover funds that are invested in assets tersebut.Demikian Similarly, if the company entered into an investment in fixed assets, is also the hope that the same investment in current assets, namely that the company will be able to obtain return funds invested in fixed assets.Another consideration which the authors in reviewing fixed assets compared with financial assets is the kind described by experts as follows: Lukman Samsudin (1994: 408) in the book Financial Management of the Company as follows:"Property and equipment is an investment that absorbs most of the capital invested in the company and is a must in the company because without it the process of production assets would not be possible to walk."
Further stated that:"Fixed assets are often referred to as" The earning assets, "namely the real assets generate revenue for the company, therefore the fixed assets is what provides the basis for" Earning Power "of the company."
The general objective is to maximize the company's shareholder wealth, as well as goals to be achieved in this long-term investment is to maximize shareholder wealth or firm value maximization.Based on the above thinking, the author tries to formulate a hypothesis which is the tentative conclusions of this study as follows:"CONTAINED SIGNIFICANT EFFECT OF FINANCIAL PERFORMANCE UNDER THE RETURN ON INVESTMENT AND ASSET TURNOVER OF FIXED ASSETS INVESTMENT"
1.6 Research MethodologyIn conducting this research, writer use descriptive method, the method in researching a group of people, an object, a condition, a system of thought or an event.Engineering data collection relating to the issues discussed are as follows:1. Field Research (Field Research)That is the way of collecting data by conducting direct research on the company to later learned, processed, and analyzed. As for the steps undertaken to obtain data is to request the necessary data.2. Studies Library (Library Research)Ie collection of secondary data is conducted to obtain information and data from literature in the form of books, magazines, papers relevant to the theoretical basis for the problems examined in order to obtain a deep understanding of and support the process of discussion on issues that have been identified.
1.7 Location and Time ResearchThe study was conducted in Textile Companies in Bandung in August until December 2005.
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