Rethinking Debt in Defense Firms: Why Profitability Beats Liquidity In Bandung, 2017–2024

Abstract

This study aims to analyze the effects of profitability and liquidity on capital structure in the defense industry in Bandung during the period 2017-2024. Using a descriptive-verification quantitative approach, this study uses secondary data derived from the company's financial statements. Profitability is proxied by the net profit margin (NPM), liquidity by the current ratio (CR), and capital structure by the debt-toequity ratio (DER). The results show that neither profitability nor liquidity significantly affects capital structure, either partially or simultaneously. However, NPM shows potential as a reliable indicator to manage capital structure in accordance with industry standards. These results suggest that increasing internal profitability can be a key strategy for the defense industry in Bandung in strengthening the sustainability of its capital structure.