Czech Enterprises Research Articles

EFFECTIVENESS OF THE USE OF COMPENSATION BONUSES IN THE CZECH REPUBLIC

Aim: This paper focuses on the evaluation of the impact of the use of compensation bonuses during a pandemic on the economic situation of companies. Methods: In order to achieve this objective, a primary quantitative survey in the form of a questionnaire survey was conducted in Czech enterprises and two research questions were set. The research questions were answered by testing four hypotheses, which focused on testing the relationship between the use of compensation bonuses and the nature of the change in the economic situation of the enterprise in terms of sector, size and prevailing business relationship. The parametric two-sample one-factor ANOVA and Pearson's Chi-squared test were used to test the hypotheses. Main findings: The results showed that the use of compensation bonuses was associated with a negative change in the economic situation of the firms. Differences in the magnitude of the effect were observed in terms of the prevailing business relationship and the size of the enterprises. The business sector did not affect the strength of the association between bonus use and change in economic situation. Limitations of the paper: the paper focuses on observing the short-term trend and is limited to Czech enterprises during the pandemic period.

Digitalization of BSR in the recession

Digitalization of BSR (buyer supplier relationship) is generally one of the effective tools to strengthen the supply chain. This study aims to establish the correlations between the perceived importance of BSR, investment in BSR digitalization and ER (economic result) change. Data collecting was realized in the form of a questionnaire survey. This survey was carried out in Czech enterprises of different focuses and sizes. Hypotheses are tested using Pearson's Chi-squared test. The study confirmed that correlation between the perceived importance of BSR and investment to BSR digitalization is stronger for producers than for service providers. The investment in BSR digitalization brings about ER development in the short term only for services providers. Enterprises do not associate the development of ER and the importance of BSR. BSR is considered an important area as part of the SCM whole, but ER development is not associated with this area, nor does investment in this area have a clear economic effect in a recession. Thus, the logical triad of "importance of the process- investment in process development – process effect" is unprovable in the case of BSR digitalization in a recession.

Economic Relations between Hungary and Czechia

Trends of the economic relations between Czechia and Hungary – from Hungarian point of view – are reviewed, based mainly on the data of statistics office (KSH) and on the National Bank of Hungary (MNB). Developments are examined in EUR throughout the study, thus evaluation is exempt from HUF exchange rate changes. The first part presents, based on KSH data, the external trade turnover changes between Hungary and Czechia in 1994–2022. Czechia is an important trade partner of Hungary. Timely changes in product structure are emphasized, the most recent state is presented, based on SITC and BEC nomenclature. Car industry turnover size and structure is presented. The role of Czechia in the external trade of services is significantly smaller than in that of goods, but trade increases faster in this field. The second part compares, based on MNB data, the size and divisional structure of the outstanding capital stock, showing that Czech enterprises in Hungary are more productive than the average foreign subsidiary.

Economic Performance of Czech Enterprises under the Control of Subjects from War-Affected European Countries and Their Comparison with Western and V4 Controlling Countries

The article deals with the evaluation of the economic performance of domestic enterprises under foreign control, especially by subjects from Eastern European countries currently involved in the war conflict in Ukraine, through several key indicators monitored by Inward Foreign Affiliates Statistics (IFATS) and compiled by the Czech Statistical Office (CZSO). The war conflict in Ukraine raises, among other, questions about the effects of sanctions against aggressor countries. IFATS could serve as one possible source for evaluation of their impact with new data coming in the future. In the article, selected data from the IFATS database will be compared for the economy as a whole and according to the specific prevailing economic activities as well. Although the contribution of enterprises controlled by subjects from both aggressor countries and Ukraine to the Czech economy is quite marginal, the latter ones are among the most represented in terms of their number that is still growing. However, their economic importance grows much slower.

Zombie Firms during and after Crisis

The phenomenon of zombie firms is gaining the attention of economists across different countries of the world; the increased interest is particularly evident after periods of economic crises. In our study, we focus on the development of zombie firms in the period before and after the 2008 crisis within two different economies, i.e., Germany and the Czech Republic, to provide insight into how different conditions and the overall economic context affect the fact that companies are more prone to becoming zombie firms. We implemented a difference-in-differences regression model to estimate the treatment effect by comparing the change (difference) in the differences in observed outcomes between these two countries. The data were obtained from two databases—the database Albertina by Bisnode a.s. providing financial statements of enterprises in the Czech Republic, and the database provided by Creditreform AG, which includes annual report data for a large sample of German companies. The dataset of German enterprises included 1,444,698 observations, i.e., 338,923 firms, and the dataset of Czech enterprises included 2,139,462 observations, i.e., 523,542 firms, both across the years 2000–2016, i.e., the data sample covered the period before and after the 2008 crisis. The different development of the share of zombie firms after the great financial crisis between Germany and the Czech Republic was proven as statistically significant. The findings confirm Germany is a country with a more stable economy and with a significantly lower risk of zombie firms’ persistence, while the Czech Republic is at the level of the European average in terms of zombie share. The results also suggest an influence of post-crisis monetary policy on companies and the possible link between low interest rates and a growing share of zombies.

Quality 4.0 Maturity Assessment in Light of the Current Situation in the Czech Republic

Production companies throughout the world are currently facing challenges with the extensive transformation of their processes with regard to digitalisation and other features of Industry 4.0. Simultaneously, traditional quality management processes must be significantly changed, and the umbrella term “Quality 4.0” is used to represent this transformation. Many companies, including Czech enterprises, are still struggling with the concept of Quality 4.0, as there are a lot of uncertainties, misunderstandings, and false approaches. Additionally, a lot of questions arise about how to provide an objective and comprehensive assessment of the company’s maturity or readiness for Quality 4.0. Therefore, the main objective of this article is to present our proposal of a framework and methodology on how to assess and measure the maturity level for the implementation of Quality 4.0. This proposal will be supplemented by a presentation of the main results obtained from a special field study, which was conducted at Czech production companies with the aim of obtaining a representative set of information showing their readiness to adopt Quality 4.0 and convert existing quality management systems into the new era. The authors also identify some research gaps, including the necessity to confirm the mutual relationship between the dimensions and items of Quality 4.0 and the sustainable development of companies or society.

Metamorphoses of Earnings in the Transport Sector of the V4 Region

The transportation sector is a crucial sector of the sustainability of every national economy. Previous studies highlighted the core significance of transport enterprises in European countries over the past 60 years. The long-term sustainability of enterprises is determined by their ability to gain earnings. Thus, earnings are the synonym of significance in corporate life. The purpose of this study was to capture the lever year, the trend, and the slope of the development of earnings in the transport sector before the COVID-19 pandemic. Time series of the annual earnings of the enterprises from the close countries of the V4 region were used during a 10-year period. Buishand’s test sets the change-points of the development and indicated the values of specific central lines. The year 2013 was the lever date for the earnings of 830 Slovak and 1042 Hungarian enterprises. The year 2015 was the year of momentum for 757 Polish enterprises. The development of 397 Czech enterprises was mainly influenced by the year 2014. The results of the Mann–Kendall test detected a positive trend in the series of business finance in all countries. In addition, the Sen’s slope was estimated in the transport sector for the analyzed period 2010–2019.

Distinctive determinants of financial indebtedness: evidence from Slovak and Czech enterprises

Research background: Indebtedness indicators are used to monitor the structure of corporate financial resources. The company's share of its own and foreign resources affects the financial stability of the company. A high share of own re-sources makes the company stable, and independent. With a low share, on the contrary, the company is unstable, market fluctuations and credit uncertainty can have serious consequences. However, foreign capital is cheaper, and too high indebtedness ratios can jeopardize the existence of enterprises.
 Purpose of the article: In general, the economic recession worsens the capital structure of enterprises, especially their debt management. Thus, the paper aims to apply the set of 13 indebtedness ratios to a sample of 779 Slovak and Czech enterprises from the construction sector to determine key microeconomic determinants that may influence the level of indebtedness.
 Methods: A non-parametric one-way analysis of variance ? the Kruskal-Wallis test ? was used to determine whether the set of indebtedness ratios is the same across countries, districts, and sizes. For analyzing the specific sample pair of stochastic dominance, the pairwise comparison was realized using the Dunn'stest with Bonferonni correction. The Mann-Whitney test was used to compare the differences in the set of indebtedness ratios between two independent groups of enterprises, based on their legal form and country.
 Findings & value added: The level of total indebtedness ratio and the self-financing ratio depends on the region as well as on the size of the enterprise and the legal form. In the case of credit indebtedness and debt-to-cash-flow indebted-ness, their dependence on the size of the enterprise and the legal form is obvious. The importance of the region and the legal form of enterprises, vice versa, affect the level of the financial independence ratio. These outputs are relevant for au-thorities, policy makers, or financial institutions to identify financial constraints that construction enterprises face and, as a result, make a long-term contribution to theory in this field.

Implementation of Voluntary Instruments by Czech Enterprises to Meet Sustainability and Competitive Growth

A responsible business reflects the fundamental values of a society and is important for all enterprises. It can improve their economic, environmental, and social characteristics from a short- and long-term perspective through innovative products and services, new capabilities, and stakeholder involvement. This study aims to identify the common convergent factors of voluntary instruments in management systems to achieve sustainable business and competitive growth. There are several tools aimed at achieving sustainability and competitiveness, an important component of which is the subject of this study: the voluntary approach. To determine the key factors of this approach, we used the online questionnaire technique of data collection (n = 183). We also conducted exploratory analysis with factors estimated by the principal components and orthogonal rotation using the varimax method. Relevant driving forces are identified in the development of the business models of sustainability and competitiveness, including the integration of quality, environment and occupational safety and health management systems, the environmental profile of the organisation for economic and social affairs, voluntary reporting of environmental activities, and evaluation of environmental impacts. These factors make a significant contribution towards improving environmental sustainability while ensuring competitive business. The ability to move quickly and successfully to these business models is an important source of sustainable competitive advantage.

Exploring firm-level and sectoral variation in total factor productivity (TFP)

PurposeThe objective of the study is to identify and explore factors affecting the productivity of companies in the Czech Republic with a focus on the role of firm size, firm age, indebtedness and long-term negative equity, efficiency of assets usage, liquidity, legal form, location and sector affiliation.Design/methodology/approachThe study utilizes a large unbalanced panel dataset of 91,257 firms (548,998 observations in total) covering the period 2000–2019. The dependent variable, i.e. total factor productivity (TFP), reflecting the overall firm productivity, was estimated by ordinary least squares (OLS) regression. The main findings were obtained through the estimation of two econometric models explaining the effects of factors on firm-level TFP. First, the OLS regressions together with Nomenclature of Territorial Units for Statistics (NUTS) 3 regions, year dummies and robust standard errors were estimated. Second, as a robustness check, the very same model was estimated with the random effects (RE) generalized least squares (GLS) method.FindingsThe analysis has shown a statistically significant U-shaped relationship (with the turning point of 38, resp. 36 years) between firm age and the overall TFP among the Czech enterprises. The authors provide two key findings in terms of a firm size-productivity relationship. Firms with fewer employees, often officially registered as self-employed individuals/freelancers, report higher levels of productivity. Nevertheless, when it comes to firm property (assets), the authors find a positive relationship between firm size and TFP. A high proportion of debts in the capital structure of analysed companies, or even negative equity, has been negatively associated with TFP levels.Research limitations/implicationsMore research is needed in the deeper exploration of sectoral and regional determinants of firm TFP, as both regional and sectoral heterogeneity were observed in the study. The authors propose the employment of a multi-level modelling approach, including a range of continuous variables and investigation of their role in shaping firm-level productivity.Practical implicationsConcerning the results, managers should be mindful of optimal capital structure principles due to the negative impact of a high level of debts on the productivity level. High indebtedness means high-interest payments drawing earnings off, which may be, especially in the long term, a hindrance to investments. The entrepreneurship and small- and medium-sized enterprise policies may be targeted at the soft policy actions, including advisory services and counselling on business development or risk and on the provision of financial capital allowing firms to strive for growth-oriented projects.Originality/valueTo the best of the authors' knowledge, this is the first attempt to provide insight into the firm-level productivity determinants, based on the large dataset covering enterprises across the whole economy over the long term, representing the structure of the country's entrepreneurial activity.

Focused on earnings management of manufacturing sector in the V4 region

Research background:Earnings management is global phenomenon of legal manipulation. The number of the examinations related to earnings management in the V4 region has been increased. These international studies identified the manipulation between countries and for different periods of years, but the assessment of individual sectors has been still missing. The article focused on sector manufacturing and its earnings management to gain global view of this issue for this region.Purpose of the article:The basic purpose and the selected aim of provided study was to detect the status of the activities of earnings management between the enterprises in the V4 region in set sector of the national economies.Methods:The realized financial study used 1,612 Slovak, Czech, Hungarian, and Polish enterprises from sector “C” manufacturing. Discretionary accruals were computed by the Modified Jones for the year 2019. One-way Anova was run for this investigation to test delivered hypotheses of the paper. Additionally, Scheffe’s procedure was computed to identify significant differences in manipulation of the earnings between individual countries.Findings & Value added:The article detected that there was difference between earnings management in the V4 region based on selected sample of enterprises from the sector manufacturing. Post hoc comparisons showed that significant discrepancy in earnings manipulation was between Slovak and Hungarian enterprises in 2019 on one hand. On the other hand, similar approach was between other emerging countries.

Earnings management: Local or global phenomenon in the Visegrad Four?

Research background: Increasing number of national scientific studies related to business finance shows that the earnings management phenomenon as a legal apparatus of manipulation business profit plays a significant role in financial reports in conditions of Slovak economy. Slovakia belongs to Visegrad Four, group of very historically and developmentally close countries. That is why it is relevant to compare the issue of earnings manipulation it these countries’ context. Purpose of the article: The main purpose of the article is to confirm global approach to manipulation of earnings in the Visegrad Four’s enterprises and justify that managers incline to earnings management systematically in all analysed group not only at a local level in chosen country. Methods: This econometric investigation used the observations of earnings before interest, taxes, depreciation and amortization of 1,058 Slovak enterprises, 688 Czech enterprises, 1,376 Polish enterprises and 731 Hungarian enterprises. It was investigated nine-years period from 2010 to 2018. Non-parametric time series trend modelling was run by Mann-Kendall test and estimation of the slope of the trend by Sen’s method used a linear model. Findings & Value added: The article focused on nine-years development of earnings before interest, taxes, depreciation and amortization in the Visegrad Four’s enterprises. It was found out the systematic trend manipulation in all analysed countries. This fact highlighted that earnings management is not local phenomenon, but its development is globally preferred tool of business finance.

Advanced methods of earnings management: monotonic trends and change-points under spotlight in the Visegrad countries

Research background: Enterprises manage earnings in an effort to balance their profit fluctuations to provide increasingly consistent earnings in every reporting period. Earnings management is legal and very effective method of accounting techniques and may be used to obtain specific objectives of the enterprises involving the manipulation of accruals. Therefore, there is a need to analyze it in the context of group of countries, while the issue of their detection in the new ways appears. 
 Purpose of the article: The analysis of annual earnings before interest and taxes (EBIT) of 5,640 enterprises from the Visegrad Four during the period 2009?2018 confirms that the development of earnings management in these countries is not a randomness. Thus, the aim of this article is to determine the existence of positive trend in earnings management and to detect the change-point in its development for each Visegrad country.
 Methods: Grubbs test, Mann-Kendall trend test and Buishand test were used as appropriate statistical methods. Mann-Kendall test identifies significant monotonic trend occurrence in earnings manipulation in every country. Buishand test indicates significant years, which divides the development of EBIT into two homogenous groups with individual central lines.
 Findings & Value added: Based on the statistical analysis applied, we rejected randomness in the managing of earning, but we determined the trend of its increasing. The positive earnings manipulation was not homogenous in the analyzed period, however, a change-point was defined. Year 2014 was identified as a break-point for Slovak, Polish and Hungarian enterprises considering the earnings manipulation. Year 2013 was detected as a change-point in Czech enterprises. The methodical approach used may be very helpful for researchers from other countries to determine, detect and understand earnings management as well as for the investors to make decisions based on a specificities of an individual country.

Differences in the financial structure of Slovak and Czech enterprises operating in machinery manufacturing and equipment industry

Differences in the financial structure of Slovak and Czech enterprises operating in machinery manufacturing and equipment industry

Alter Ego Only Four Times? The Case Study of Business Profits in the Visegrad Group

The paper studies a new point of view and the approach to profit as an inherent part of business finance as well as a symbol of every healthy economy. The fundamental function of the profit is a stimulus; it means initial motivator of the business activity. The profit provides core resources for survival at the business start and after the stabilization, it is the synonym for progress. The aim of this paper is to detect significant change-points in times series of EBITDA during the analysed period in every country of the Visegrad Group to recognize the progress years in the monotonic development. We use a method of homogeneity test of time series that delivers significant robust results. We observe the variable EBITDA to eliminate different tax, interest and depreciation policies of these emerging countries. The original research of this article is based on empirical results of business profits of the sample of 3,853 enterprises covered by the broad theoretical review. Firstly, we identify missing values; and detect the outliers by Z-score and Grubbs test. EBITDA of 1,058 Slovak enterprises, 688 Czech enterprises, 1,376 Polish enterprises and 731 Hungarian enterprises is analysed during the period from 2010 to 2018. We eliminate the inconsistent observations and construct average values of EBITDA. Secondly, we prove normality by Jarque-Bera test, and support it by Shapiro-Wilk test, Anderson-Darling test, Lilliefors test to deliver reliable results. Thirdly, we find an independency of distribution that confirm randomness by the Box-Pierce test. And finally, we identify the years that affect heterogeneity of EBITDA in the countries of the Visegrad Four. We uncover some really surprising results. For all countries in the Visegrad Four, the year 2013 is detected as a change-point at a significance level of 0.05. This significant year shifts EBITDA between two homogeneous series with corresponding central lines and recognizes the similar annual development within the groups. In addition, we discuss the results to the areas and factors affecting the business risk. The adjustable area represented by the business dynamism has no significant impact on the development of EBITDA. The uncontrollable macroeconomic factors such as a GDP, unemployment rate, inflation rate, average monthly gross wage, and Ease of doing business index demonstrate the same development of Slovak, Czech, Polish and Hungarian enterprises. We connect our gained results to the undisputed influence of these factors and its derived components on monotonic development of EBITDA. Despite the fact, that the countries are not economically interconnected as they used to be in the past, in has to be underlined that their mutual relations are still very narrow and close and that might be the reason, why identical results are achieved in the countries with divergent development.

Innovations in the Company’s Earning Management: The Case for the Czech Republic and Slovakia

Earning management is a collection of managerial decision that results in not reporting the true short-term, value-maximizing earnings as known to management. It is focused on the changes in financial reporting to mislead the stakeholders and achieve contractual benefits. Earnings management emphasizes the manipulation of accounting choices and operating cash flows, and it is known as a practice which chooses an accounting treatment that is either opportunistic (maximizing the utility of management only) or economically efficient. The paper deals with the possibilities of detection and quantification of trend, degree and scope of the earnings management of Slovak and Czech companies from 2015 to 2017. The paper aimed to create a systematic overview of the earnings management specificities considering the enterprises’ innovation policy as the phenomenon of earnings management understood ambiguously, contradictory and without consensus. The paper is to explain various opinions of earnings management understanding and to propose methodical instrumentation for the detection and quantification of earnings management. The validity of the focus in question is multiplied by the possibility of smooth implementation in the transition countries, countries that even after almost thirty years of transformation, still show a significant degree of difference from countries with a developed market economy. In total, 29 earnings management detection models were subjected to forensic analysis. 2,155 Slovak and 4,842 Czech enterprises represented the statistical sample after the removal of extreme values. The most effective model to reveal manipulation with earnings is the Kothari model. Using the Friedman non-parametric test, trend, degree and scope of earnings management were tested. The results of the analysis showed interesting results – countries tend to manipulate earnings upwards. Detection of earnings management practices in enterprises is of vital importance provided that the real and correct data have to be presented to stakeholders and third parties to prevent any forms of financial and credit risks. Keywords earnings management, earnings management detection models, discretionary accruals.

International cooperation in research and development of Artificial Intelligence – publication and patent activity

Abstract Artificial Intelligence (AI) is one of the dynamically evolving research fields on the global scale. The world production of publication associated with the AI field increased by a third over the four-year period 2013–2017. Even less research intensive countries as Iran, Turkey, India and Indonesia appear to increase the share of the AI topics in their publication output. In the Czech Republic the fraction of publications in the AI field increased by approximately 10 % over this period. It makes the lowest increase within the EU/EEA. The field normalized citation index of the Czech publications in the year 2016 was above the world average but it is deeply below the top countries USA, United Kingdom, Switzerland, Singapore, and Norway. The extent of international cooperation in AI is generally below the world average. The Czech Republic falls into the group of less cooperating countries. The countries exhibiting the highest growth in AI research are underrepresented in the Czech cooperation portfolio. The fraction of Czech publications in AI coauthored by foreign authors is lower than the national average. It indicates a lower international collaboration in comparison with other research fields. CR falls also in the group of countries less engaged in the international cooperation. The Czech international collaboration misses the countries exhibiting the most vigorous R&D in AI. The international collaboration adds to the quality of the research. The Czech publications originating from the international collaboration are cited above the country average for the AI field. It is even more significant in the collaboration with researchers from the top countries in the AI R&D. The patent activity in the AI field has grown significantly in recent years. There is a marked increase of patent applications having inventors/applicants from more than one country. It indicates that the applied R&D in AI has a more international character in comparison with other technology fields. A high intensity of collaboration in the authorship of patent applications is within language and geographically neighbouring countries and with countries having a highly internationalized R&D system. Multinational corporations involved in international innovation networks contribute also to the international cooperation. ICT corporations like IBM, Google, or Microsoft which often employ foreign researchers have a dominant role in international cooperation. The R&D of the Czech enterprises is relatively closed to the international cooperation. Domestic enterprises in AI use foreign employees in a small extent. The domestic enterprises even do not tap into the pool of intellectual property authored by the Czech researchers. The majority of patents with participation of Czech inventors is registered by foreign corporations.

The evaluation of project management practices in the Czech social enterprises

abstract Project management is a well-established discipline among private companies, but not widely utilised in non-profit organisations. The purpose of this paper is to analyse the role of project management in social enterprises that combine these two organisational forms – the business and the charity - and contribute to the understanding of how social enterprises use project management practices to run their activities. A survey was conducted among Czech social enterprises listed in the Directory of social enterprises website, operated by P3 – People, Planet, Profit, o.p.s, a non-profit organisation dedicated to popularising social entrepreneurship and innovation. A questionnaire was sent to 203 organisations claiming to be social enterprises. In total, 61 responses were received. Descriptive statistics and the chi-square test were used for the analysis. The research has provided for the first time an empirical analysis of project management practices in social enterprises. It suggests that social enterprises use project management tools for their activities; the statistical tests show, however, that there is no statistically significant relationship between annual turnover, number of employees and support from European Union funds and project management practices.

Finansowanie przedsiębiorstw w krajach Grupy Wyszehradzkiej

W artykule podjęto problematykę finansowania przedsiębiorstw w krajach Grupy Wyszehradzkiej, w latach 1995-2015. W analizach wykorzystano dane źródłowe pochodzące z rachunków narodowych. Na podstawie przeprowadzonych badań zaobserwowano wzrost poziomu samofinansowania w przedsiębiorstwach czeskich, węgierskich, polskich i słowackich. Zauważono także spadek wartości zaciągniętych netto zobowiązań. Wśród przyczyn wskazano na wysoki poziom w sektorze przedsiębiorstw oszczędności brutto oraz spadek wartości nakładów brutto na środki trwałe. Podstawowym źródłem finansowania zewnętrznego były trzy kategorie instrumentów finansowych, a mianowicie: kredyty i pożyczki, udziały kapitałowe, pozostałe kwoty do otrzymania / zapłacenia. We wnioskach podkreślono, iż pomimo spadku poziomu finansowania zewnętrznego nie nastąpiły znaczące zmiany w jego strukturze.

Charakteristika sektoru znalostně náročných služeb České republiky

The concepts of Industry 4.0 and then Company 4.0 have been not only discussed for a long time, but have demonstrated their growing role in the development of smart businesses. The aim of the paper was to describe the approaches to the classification of knowledge intensive services of the two largest studies - Eurostat, OECD and on the basis of theoretical theses to select the codes of activity that can be considered as knowledge intensive services. By this procedure, companies with codes J and M were selected. In the last step, a description of the profitability of assets, capital and sales of defined knowledge-intensive enterprises was made with using data from the Bach database. For comparison purposes, profitability indicators were found not only for small and medium-sized enterprises in the Czech Republic, but also for neighboring countries (ie. Germany, Poland, Slovak, Austria). This comparison revealed that small enterprises in the Czech Republic in categories J and M occupy a very good position in comparison with four countries - the first place was recorded in the ROA and ROS indicators, Czech companies rank second place in the ROE indicator. The situation of medium-sized enterprises is significantly worse, especially the indicator of return on sales is at the lowest level in Czech enterprises. Furthermore, the paper graphically depicts the development of profitability indicators in an 11-year time series, where an above-average development of all profitability indicators was found with the exception of ROS in small enterprises.