Financial ratio analysis of Indonesian construction firms

This paper presents findings of a pilot study, which evaluates financial ratios in the Indonesian construction firms. The study is an extension of a larger study that is an attempt to explore strategic practices for Indonesian construction firms that generates a competitive advantage. The findings are based on annual reports taken from all of construction companies listed in Surabaya Stock Exchange (SSX) Indonesia. The SSX has classified 6 firms in the construction sector. The research methodology adopted for this study includes data collection and analysis of firm annual reports and financial statements. There are some methods and techniques of financial ratio analysis in analyzing corporate performance of construction firms. Modified traditional ratios such as Liquidity, Leverage, Activity and Profitability ratios are adapted from Construction Financial Management Association (CFMA) to support different purposes of analysis. When analyzing ratios, the results are compared with other firms in the same fiscal periods from 2003 to 2007. The analysis reveals that the Indonesian firms in this study are financially sound, where profits and returns generated from construction works are still satisfactory. However, this performance can still be sustained if they are able to manage their maximum pace at which a company can grow revenue without depleting its financial resources.