Abstract:

Keyword:

1- Introduction
Solvency refers to the company’s ability to meet its obligations in the long term. It means
the company’s ability to pay its obligations in the long-term including interest and
principal debt. In other words, it represents the financial structure of the company
(Robinson et al., 2015). Solvency ratios provide a general description of the debts in the
company’s capital structure, as well as the ability of cash flows to cover interest expenses
and fixed costs such as rent payments and leases. Assets are typically fund from two
sources, internal and external, including many items such as ordinary shares, preference
shares, reserves, bonds and bank loans, securities convertible into loans, and short-term
liabilities such as overdrafts and accounts payable (Tze and Heng, 2011; Gitman, 2006).

2- Literature Review and Hypothesis.

The Profitability ratio is the company's ability to profit in relation to sales, total assets
and own capital (Pramanik et al., 2021). This ratio can help company management and
investors to see how well a company is able to manage its investment in assets into profit
or profit. The higher the return on assets, the better for the company. The higher the
return on assets, the better for the company because the company will quickly meet the
company's debt so that it will affect the bond rating of a company.
2-1- Relationship Between Current Ratio and Profitability Ratio.
Study (Qasim Saleem 2011) The results show that ROA is only significantly affected by
liquidity ratio, while this effect is lower for ROE and ROI, while the results show that all
three current ratios, quick ratio, and liquidity ratio do not significantly affect ROE but do
on ROI. The study's main results show that the financial condition of oil and gas
enterprises in Pakistan is significantly affected by each of the variables, especially the
liquidity ratio, which ranks first. The financial condition of enterprises is also directly
affected by profit margins. Also, the Study of (REZANA INTAN AMANDA 2019) The
objective of this study is to analyze the effects of changes in cash, receivables, inventory
changes, current ratios, and debt-to-equity ratios on profitability. The sample of this study
is the basic chemical industry sector in Indonesia Stock Exchange IDX financial report
which is taken by some criteria. The results show that cash trading, receivables, inventory
changes, and credit ratios have no impact on profitability, while the current ratio
positively impacts profitability. Whereas the Study of (Jan Svitlík 2016) Liquidity ratio is
relatively strongly correlated in all three ratios, selected current ratio (CR), selected quick
ratio(QR), and selected working capital turnover (WCT), while the weak correlation
between liquidity ratio and return on assets (ROA) as an indicator for profitability
according to the results of the main findings of the study.
Study of (Hakkı Öztürk 2018) According to the Beck-Katz and Park-Kementa models,
the results are similar for stock returns on the Istanbul Stock Exchange, where price
yields and yield rates have an important effect on these returns, while current rates do not
have this effect. Stocks that generate higher returns in future periods show higher E/P
ratios and earnings ratios. According to an empirical analysis study to determine the
relationship between profit-to-price, and the current ratio on the Istanbul Stock Exchange.
Study (K. H. I. Madushanka 2018) Results from Sri Lankan listed companies operating in
manufacturing show that liquidity ratio (quick ratio) positively and significantly affects
corporate earnings. Study (A.Ajanthan 2013) of business companies listed on the Sri
Lanka Stock Exchange. According to the results of correlation and regression analysis
and descriptive statistics were obtained. They show that there is a significant positive
relationship between liquidity and corporate profitability.
According to (Dedi Mulyadi 2020) This study of transportation companies in terms of
service infrastructure listed on the Indonesian Stock Exchange analyzed the current ratio,
net profit margin, and appropriate management of the companies to show the impact on
the company's capacity. The results also show that corporate capacity falls partially
influenced the by current rate (CR), net profit margin (NPM), and optimal corporate
governance (GCG).
Study of (EHIEDU, Victor Chukwunweike 2014) This study used companies' financial
statement analysis (FSA) to determine the extent of liquidity's impact on profitability.
The results showed that return on assets (ROA) significantly affects the relationship
between the current ratio and profitability in certain firms.
2-3- Relationship Between Profitability Ratio and Solvency Ratio.
In the study by (Ahmad DAHIYAT 2016) The effectiveness of liquidity measurement,
debt ratio to measure solvency, and return on assets ratio for measuring profitability were
calculated. They analyzed the profitability of banks to demonstrate their solvency. Simple
regression was used to examine the relationships, the results showed that liquidity has a
negative effect and solvency has no effect on profitability. All the banks in Amman are
listed on the stock exchange. Whereas the Study of (Syarifah 2021) The results of the
study establish that earnings management, liquidity ratio, solvency ratio, and earnings
ratio simultaneously influence bond ratings. Earnings management, solvency rates, and
profitability ratios have a negative impact, and liquidity ratio has a positive and
significant impact on bond ratings, for all real estate sector companies listed on the
Indonesian Stock Exchange.
According to the results of a study (Abdul Aziz A. Abdul Rahman 2017) of food
industry companies listed on the Oman Stock Exchange to determine the relationship
between liquidity and income. It shows that there is no relationship between part of a
firm’s ability to meet its long-term financial obligations such as (debt/asset ratio,
debt/equity ratio, long-term debt/asset ratio, long-term debt/equity ratio, and interest
coverage) with There is no (gross profit margin and operating cash flow margin). On the
other hand, some of the results show that there is a negative relationship between (the
debt/assets ratio, and debt/equity ratio) and (operating profit margin [OPM], net profit
margin [NPM], and return on assets [ROA].) There is.
In the study by (Refin Sukmadewi), the Liquidity ratio is significantly related to
profitability, so as the liquidity ratio increases profitability increases. Because
 profitability depends on the solvency of companies operating in the Indonesian
agricultural sector listed on the Indonesian Stock Exchange.
This study (Waqas Bin Khidmat 2014) was conducted to show the impact of liquidity
and treatment on profitability. The results showed that there is an inverse relationship
between solvency and profitability, so when profitability increases solvency decreases,
and vice versa in the companies operating in the chemical sector of Pakistan.
According to (Yenni 2022) the results of this study, there is a relationship between
solvency and profitability in CV Masindo Electric Medan based on the T-test, which
partially explains the significant effect of solvency on profitability. The Fount value is
further expressed by the F test.

2-3- Relationship Between Profitability Ratio and Solvency Ratio.

2-4- Hypothesis.
H1
H2
H3
3- Method:
Research Model
4- Results and Discussion:
5- Conclusion:
6- References: