Measuring Corporate Profit Opportunities

Willard T. Carleton and Eugene M. Lerner

Journal of Financial and Quantitative Analysis, 1967, vol. 2, issue 3, 225-240

Abstract: The concept that corporate investment-growth decisions are constrained by a profit opportunities schedule is central to much of the literature on finance and the theory of the firm. These writings suggest that, for a single firm: (1) the profit opportunities schedule is a decreasing function of investment growth (the slope reflecting, inter alia, competitive conditions); (2) the schedule shifts to the right with changes in national income (except for a firm producing income-inferior goods), and (3) the schedule's position (intercept) at a moment in time reflects a host of factors that are summarized by the term “management.”

Date: 1967
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