Problem Formulation The Influence of Working Capital Management and Liquidity Towards Profitability (Case Study: Automotive and Components Industry Listed in Indonesia Stock Exchange 2008-2012)

14 sourced from long-term debt and equity capital. The benefits of sufficient working capital is Djarwanto, 2004 : 87 : a. Protect the company from the bad consequences where the value of current assets decreased. For example the financial loss because the debtor does not pay out, and the value of inventory decreased because the price declined. b. Enabling the company to pay short-term liabilities on time. c. Enabling enterprises to be able to buy goods with cash so that they can reap the benefits in the form of rebates. d. Ensured the company to has credit standing so can solve unforeseeable. e. Enabling to have sufficient supplies to serve the demand of consumers. f. Enabling the company to give credit requirement which is profitable for customers. g. Enabling the company to operate more efficiently, because there is no difficulty in obtaining raw materials, services and supplies needed. h. Enabling the company to survive in recession and depression periods.

2. Factors Determining Amount of Working Capital

According to Jumingan 2006 : 69, the factors which is influence the amount of working capital: 15 a. General nature or type of company Working capital of a companys services will be relatively lower when compared with working capital requirements of the company it self, due to service company does not require a large investment in cash, receivables and inventories. b. The time required to produce or obtain goods and the cost of production per unit or price of the goods Working capital needs of a company is directly related to the time required to acquire the goods that will be sold as well as the basic material to be produced until the goods are sold. The longer the time required to manufacture or acquire such goods, the greater the working capital needed. Terms of the purchase of materials or merchandise Terms of the purchase of merchandise or raw materials that will be used to produce goods greatly affect the working capital required by the company. If credit terms are accepted at time of purchase benefits, so little cash that must be invested in the stock of materials or merchandise or otherwise. c. Terms of sale The more soft loans to buyers of the company will lead to the large amount of working capital invested in the sector accounts. d. Inventory turnover rate Inventory turnover rate indicates how many times inventory is replaced in the sense that bought and resold. The higher of inventory turnover rate is the amount of working capital required lower and will