Thick margins, thin times: the biggest profits are piled up by corporations in the EC's least prosperous economies

Article Abstract:

Corporations with the highest profit margins typically are located in countries with the least prosperous economies in the European Community (EC). Corporate organization by sector generally is similar across EC countries, but profit margins differ considerably. In the electrical products industry, the German conglomerate Siemens had revenues of European Currency Units (ECUs) 30 billion and revenues of ECU 754 million in 1989. The profits of UK company GEC were only 6% less than Siemens on one-quarter of the revenues as GEC enjoyed a profit margin of 10% compared to Siemens' 2.5%. The difference in margins across EC corporations could be the result of differences in the financial relationships and the cost of raising capital, in the relative power of shareholders and its effect on corporate governance, and in levels of inflation and the effect of inflation on corporate profitability.

United Kingdom, Management, Germany, Profits, Corporate profits, Corporations, British, European Community, Corporations, German

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Backing for break-outs

Article Abstract:

The European business climate is currently favorable to business start-ups, management buyouts, and buy-ins of other companies. The numbers of available businesses ripe for being taken over has increased due to the retirements of large numbers of post-WWII company founders. Banks are a source of financing for start-ups, buyouts, and buy-ins, but banks loans can be recalled at any time and debt can prove a burden to firms. Venture capital is a better route for financing. While the equity participation inherent in venture financing translates into some loss of control, it also has the benefit of spreading the risk. Statistics supplied by Venture Economics for the European Venture Capital Association reveal that there were 23 billion European currency units of capital in venture capital funds available in Europe in 1989. Governments are also suppliers of capital in many countries.

Analysis, Statistics, Venture capital companies, Venture capital, Employee ownership, European Venture Capital Association, Venture Economics

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