Analysis of Korean Corporate Business Performance in 2017
Korea's corporate revenue expanded sharply in 2017, supported by strong exports of semiconductors and petrochemicals. A recent report released by the Bank of Korea shows that revenue of overall industries grew by 9.9 percent in 2017 compared to 1.1 percent in the prior year and that the rate of total asset growth accelerated year on year to 5.5 percent from 4.3 percent. The report is based on an analysis of financial statements from 23,145 non-financial corporations with at least KRW 12 billion in total assets that are subject to external audit.
The year-on-year revenue growth rate for large corporations rebounded from a minus 0.3 percent in 2016 to 9.5 percent in 2017. Small and mid-sized businesses saw their revenue grow to 11.3 percent from 7.4 percent over the same period. Total assets of big companies increased by 5.3 percent in 2017, while the asset growth rate for smaller businesses slowed down to 6.4 percent from 7.2 percent.
Korean businesses also performed well in terms of profitability last year. Their operating margin and ratio of net income before taxes to sales improved to 7.4 percent and 7.6 percent respectively from 6.2 percent and 6.0 percent. Both large and smaller companies recorded an increase in profitability, and those in the manufacturing sector in particular achieved higher profitability.
The financial position of Korean corporations remained stable, with their debt to equity ratio and debt to total assets ratio falling year on year. The overall debt to equity ratio decreased from 98.2 percent in 2016 to 92.3 percent in 2017, while the debt to total assets dropped by 1.4 percentage points to 25.1 percent over the same period. These two ratios are indicators of financial leverage, showing the percentages of a company's equity and total assets financed by debt. A higher ratio means more leverage and more risk.
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