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Comparison of the financial burden on corporations
Methodology:
European Financial systems
analysis according to the decomposition of the second Du Pont equation
ROE = EAT/E
EAT/E = EBIT/S*EBT/EBIT*EAT/EBT*S/A*A/E
Where:
Interest burden (IB = EBT/EBIT)
Tax burden (TB = EAT/EBT
Asset Turnover (ROS = S/A)
Equity multiplier (FL = A/E)
Research questions:
What are the development trends of enterprises in the monitored sectors of the Czech economy?
What is the impact of tax and interest burden on the profitability of corporations in the both sectors?
Does the corporation create an added value in the both sectors (ROE - re > O)?
Does the debt increase positively affect on the performance of the monitored corporations (ROA - I%) > O)?
What are the conclusions?
Comparison of the financial burden on corporations in industrial sector and banking sector
Jaroslav Sedláček
Masaryk University - Faculty of
Economics and administration
Brno
Conclusions
The dominant influence in the banking sector was found in the financial leverage, which increased the value for the owners many times more than in industry.
The value for owners also increased due to the reduction of interest burden for industrial businesses, which originally took 11.78% from their gross profit and then decreased to the current 2.93% and at banks it decreased from 63.51% to 33.06%.
Development in the tax burden in the banking sector show an opposite trend, the state contribution from EBIT increased from the original 5.41% to 12.39% due to a signifi-cant drop in bank output and practically constant income tax rates. In the industrial sector, the tax burden was reduced from 24.38% to 20.94%, which supported the growth trend of both ROA and ROE curves.
What about the future? Tax burden (specific taxation)? Interest rate (interest rate increase)?