Profit margins, financing and investment in the Peruvian business sector (1998-2008)

Germán Alarco Tosoni

Revista CEPAL, 2011

Abstract: This paper develops a model and explains the determinants of profitmargins in the Peruvian business sector in the 1998-2008 period. Theseare established in a fixed-price scenario, with reference to a set of variablessuch as the price elasticity of demand, the behaviour of possible industryentrants and any regulatory intervention by government. In addition,there is a direct relationship between profit margins and self-financingof investment. Profit margins and profit ratios in the business sector arerising and exceed international norms. The paper also identifies a trendtowards lower levels of debt and leverage. It does not reject the hypothesisof linkage between profit margins and investment at the aggregate andsectoral level. The output-to-capital ratio or sales-to-assets ratio is directlylinked to profit margins. Most investment is self-financed.

Date: 2011-12
Note: Includes bibliography
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecr:col070:11541

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