The Effect of Inflation and Exchange Rate on Profitability Through Liquidity as a Mediating Variable in the Indonesian FnB Companies

Abstract

Changes in macroeconomic condition marked by inflation and the depreciation of the rupiah during the 2020–2025 period have increased pressure on the financial performance of manufacturing companies, particularly those in the F&B subsector, which are highly dependent on imported raw materials. These conditions have the potential to reduce profitability through increased production costs, a decline in consumer purchasing power, and disruptions to companies’ cash flows. This study aims to analyze the effects of inflation and exchange rates on profitability, with liquidity as a mediating variable, among manufacturing companies in the F&B subsector listed on the Indonesia Stock Exchange during the 2020–2025 period. The study employs a quantitative approach using secondary data in the form of corporate financial statements and official macroeconomic data available online. Profitability is proxied by Return on Assets (ROA), while liquidity is proxied by the Current Ratio (CR). The data were analyzed using multiple linear regression to determine the effects of the independent variables on the dependent variable. The results show that inflation and liquidity have a positive and significant effect on corporate profitability, while the exchange rate has a significant negative effect. Liquidity also mediates the effects of inflation and the exchange rate on profitability. This findings are expected to contribute to the development of the literature on the mechanisms through which macroeconomic factors affect profitability and to serve as a basis for companies to consider when managing liquidity to maintain financial performance amid economic uncertainty.