© 2000 John Petroff
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© 2000 John Petroff |
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D- Empirical evidence on differences in expense and profit patterns among companies and industries
We present here some aggregate evidence on patterns in expenses and profits of American businesses. We start by showing the compiled data of net profit margin in eight sectors in Table T-13.12 below. One will recall that net profit margin in RMA is calculated as profit before tax divided by sales.The raw data comes from over 80,000 borrowers used by RMA in its Annual Statement Studies.
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Size of Sales in $ millions |
0-1 |
1-3 |
3-5 |
5-10 |
10-25 |
>25 |
Ave |
| CONSTRUCTION |
3.3 |
3.7 |
4.1 |
3.7 |
4.0 |
4.4 |
3.9 |
| MANUFACTURING |
-0.4 |
2.7 |
3.5 |
4.2 |
4.5 |
5.1 |
3.3 |
| WHOLESALE |
2.1 |
2.4 |
2.3 |
2.6 |
2.6 |
2.8 |
2.5 |
| RETAIL |
2.2 |
2.4 |
2.5 |
2.4 |
2.6 |
3.4 |
2.6 |
| TRANSPORTATION |
4.9 |
5.0 |
3.9 |
5.0 |
4.1 |
4.5 |
4.6 |
| INFORMATION |
-4.9 |
2.7 |
2.7 |
1.9 |
4.1 |
7.1 |
2.3 |
| SERVICES |
5.3 |
4.2 |
4.35 |
4.1 |
4.2 |
4.2 |
4.4 |
| UTILITIES |
13.4 |
10.8 |
8.2 |
12.1 |
10.6 |
6.4 |
10.3 |
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Average |
3 |
4 |
4 |
5 |
5 |
5 |
4.3 |
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Standard deviation |
5 |
3 |
2 |
3 |
3 |
1 |
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The data will be utilized in subsequent sections for specific industries or in combination with other data. What emerges from an initial reading of the table is that there is a convergence toward a 5% net profit margin for the larger firms in the group in all sectors. But there is plenty of variation elsewhere, with entire groups of firms showing averages of median values negative.
See review question Q-13D.1.
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