Factors Affecting Profitability of Small Medium Enterprises

The objective of this research is to examine factors affecting profitability such as firm size, firm age, growth, lagged profitability, productivity, and industry affiliation of SMEs firm listed in Indonesia Stock Exchange. Source of data used in this study is secondary data based on index PEFINDO 25 on period August 2011- January 2012. The results showed that firm size, growth, lagged profitability, productivity and industry affiliation significant effect on profitability. While the variable firm age does not significantly influence profitability. The results of the regression coefficient indicates that the variable firm size, growth, lagged profitability have a negative effect on profitability, While the variable productivity and industry affiliation have a positive impact on profitability. Therefore, for further improve company¿s performance the manager should define a strategy to increasing profitability with focusing on productivity.