Assess profitability of non-financial firms

This paper defines first profitability and its measurement. Net operating return on assets is shown to be the only kind of profitability that can be derived from business accounting data - adequately reprocessed - and provide relevant economic information. This requires to estimate the length of life of equipment in order to quantify its depreciation independently of corporate tax rules and the corresponding evaluation of assets. Various ways of reevaluation of assets are compared. The length of life is estimated for each category of assets, defined by both their type and the industry using them, by means of cumulated flows of investment. Such estimates of profitability are closer to those provided by the national accounts than to the estimates usually derived from business data. However, noticeable discrepancies between the first two remain in particular between the estimates of capital stock. Throughout the years 1985 to 2001 the proposed estimates are stable at circa 8% except a peak at the end of the 90s. This stability is the result of the decrease in the apparent capital productivity compensated by the upturn of the margin ratio.