Corporate Profitability and Competitive Circumstance

Abstract

Among firms with income, profit on equity is generally greater for small firms than for large firms. The strong profit showing of small businesses is associated with higher sales/asset ratios than for large firms, higher debt/equity ratios, and higher realized losses. The authors conclude that differences in profitability among firms of different sizes are indicators of their differing competitive circumstances and of their differing contribution to industry development. These findings are based on cross-industry and intraindustry analysis of data from the Corporate Source Books of the Statistics of Income.