Negative Profit Margins Research Articles

A Financial Analysis and Valuation of Electric Vehicle Companies

This paper examines the electric vehicle (EV) industry, with a particular focus on Tesla, NIO, and BYD. Tesla is a leading player thanks to its efficient operations and diverse product lineup, making it a preferred choice for investors. NIO, despite having a wide range of products, faces profitability challenges, which may discourage investors. BYD impresses with its consistent profitability and significant market share in China. Financial metrics such as net profit margin, operating margin, and asset turnover are analyzed to assess the performance and appeal of each company to investors. Tesla's operational efficiency, demonstrated by its strategically located Superfactories in major markets, reinforces its industry leadership. Its diverse product range and global market reach inspire investor confidence. On the other hand, NIO grapples with negative profit margins and limited production capacity, lessening its appeal to investors. BYD's steady profitability and considerable market share in China enhance investor confidence. Despite intense competition and market volatility, all three companies are poised to capitalize on the growing demand for EVs, driven by global sustainability efforts. In conclusion, Tesla and BYD appear as appealing investment prospects due to their profitability and market dominance, while NIO struggles to attract investors. Tesla's innovative production strategies and extensive market reach place it at the forefront of the EV industry, likely drawing more investors in the future.

Benefits of sourcing alternative inputs of manufacturers for suppliers

A downstream manufacturer can procure high‐quality inputs from its upstream raw material supplier to produce finished products with high quality. The manufacturer may also have the option to source alternative cheaper low‐quality inputs to partially replace the inputs from its supplier to produce finished products of lower quality. That is, the manufacturer can use a mixture of the supplier's inputs and alternative ones in product design such that product quality depends on the proportion of each input used in products. We endogenize this product quality decision in a simple analytical model to study the impact of this option on the supplier's profits. Intuitively, the option of sourcing alternative inputs could hurt the supplier in two ways: It sells fewer inputs, and it needs to set a lower wholesale price due to competitive pressure. However, our study reveals an opposite finding: The supplier can benefit not only by selling more inputs but also by setting a higher wholesale price when the manufacturer has the option of sourcing alternative low‐quality inputs. This interesting finding is due to the wholesale price push‐up effect: The upstream supplier may deliberately raise the wholesale price when sourcing alternative inputs is an option for the downstream manufacturer. This increased wholesale price encourages the manufacturer to use a higher proportion of alternative cheaper inputs in its product design; as a result, the manufacturer's marginal cost is reduced, which leads to a decrease in its retail price. Therefore, consumer demand for the manufacturer's products becomes higher, which in turn results in higher manufacturer demand for the supplier's inputs. Moreover, we show that despite this higher wholesale price, the manufacturer can earn higher profits by optimally charging a lower retail price. Furthermore, we find that the wholesale price of the supplier's inputs can exceed the manufacturer's retail price, thereby leading to a negative profit margin for the manufacturer from using the supplier's inputs. Finally, we demonstrate the robustness of our findings under several model extensions.

Invest Value Analysis Based on Risk, Profit and Market

In 2022, the post-pandemic period, the health sector stocks had a big difference in price performance between different stocks. Some stocks rose significantly because of the vaccines and specific drugs for covid-19, while others' growth slowed down or even had negative profit margins because people were afraid to go to the hospital which cause a reduction of other drugs' sales volume. In the health sectors, there're companies that research and development of drugs, distribute drugs, make medical apparatus and instruments, and even have some "grocery stores" like CVS. It might be difficult to find which stocks are worth the cost of implementation in the post-pandemic period and the special increase because Covid-19 has ended. This paper will analyze 3 stocks as an example to show the investment decisions between different investors. By using risk analysis, profit analysis, and market analysis, this paper will show the investment value of 3 stocks: CVS, MCK, and WBA. These analyses are based on PE, PB, ROA, ROE, profit margin, and many other ratios in 2022. This article will help people choose the health sector stocks. In the conclusion, MCK has the most investment value in 2023 and MCK has a stable income with low risk. WBA may be a bad choice.

Lifting the mask mandate puts our priorities in plain sight.

Lifting the mask mandate puts our priorities in plain sight.

Relative Cost, Profitability and Efficiency among Different Types of Dairy Farms at Bharatpur, Chitwan, Nepal

Dairy sector is gradually commercializing and modernizing with the use of improved breeds, processed feeds, cultivated grass, fodders, medicines and additives in Nepal. In this context, this study was designed to evaluate the relative cost, return, resource use efficiency, return to scale and profitability of milk production in different type of dairy farms. Primary data were collected through face-to-face interview using semi-structured interview schedule from a sample of 240 dairy farms selected from simple random sampling technique in 8 wards of Bharatpur Metropolitan City, Chitwan. Data were analyzed using descriptive statistics, cost and profit analysis, linear production function and Cobb-Douglas function. It was found that pure buffalo farms were facing negative profit margin against the profit of Rs. 32565 and Rs. 106627 at cow and mix system of dairy farming, respectively. Average variable cost of per liter milk production was Rs. 93.70, Rs. 54.80 and Rs. 44.73 for buffalo, cow and mix farms, respectively with benefit-cost ratio of 0.99, 1.44 and 1.62 for respective categories of the farms. Green grass, dry fodder, labour, feed, medicines and additives were significantly contributing to milk production in buffalo and cow farms. But, only grass, fodder and labour were contributing to milk production in mix dairy farms. All categories of farms were suffering from decreasing return to scale but they were still profitable over variable cost. Labour was the most contributing factor in all three categories of farms and thus dairy farming seems potential to create productive employment. This is concluded that dairy farming system can be promoted profitably by enhancing the level of use of labour, grass, fodder, medicines and additives.

Cooperative employment cycles in Spain. Does regional localization matter?

This paper presents a territorial analysis of the cooperatives within various Spanish regions. The purpose is threefold. The first objective is to investigate whether the cooperatives’ employment cycle shows a different relationship regarding the business cycle and whether this depends on the regional localization of the cooperatives. The second is to evaluate whether the greater the cooperative tradition, the greater the decoupling between business cycle and cooperatives’ cyclical phases. The third objective is to find out if, within the different Spanish regions, those cooperatives that survived the 2008 crisis share some common patterns. Our results show that (1) more than 50% of the regions achieve a medium degree of a pro-cyclical relationship and that only a small group of regions presents a counter-cyclical relationship; (2) the cooperatives' employment exhibits a certain degree of resilience; and (3) the cooperatives that survived the crisis were mature, small-sized firms with adequate financial ratios but with a negative profit margin.

SNF‐VBP Penalizes Skilled Nursing Facilities with Negative Profit Margins

Research ObjectiveSkilled Nursing Facility‐Value‐based Purchasing Program (SNF‐VBP) from the Centers of Medicare and Medicaid Services (CMS) incentivizes facilities to improve quality through lower hospital readmissions. However, SNF‐VBP may penalize nursing homes that are unable to invest resources to reduce readmissions. Although existing research has examined facility characteristics and SNF‐VBP performance, the relationship between financial performance and SNF‐VBP performance is unknown. In this study, we examine the SNF‐VBP performance by the financial performance of SNFs.Study DesignWe use data from three sources: 2019 SNF‐VBP performance data from CMS, and latest available CMS cost reports for SNFs (2017), and SNF characteristic data from LTCfocus.org (2017). We use descriptive methods to examine total profit margins and SNF‐VBP performance. We examine the characteristics of facilities with positive and negative profit margins, and within these, we further examine characteristics of facilities that are rewarded or penalized under SNF‐VBP. In the adjusted analysis, we evaluate the relationship between having a negative profit margin and experiencing penalty under the SNF‐VBP controlling for several SNF characteristics including resident acuity index, occupancy percentage, payer mix, size, profit status, chain membership, and market competition.Population StudiedAll freestanding SNFs with valid SNF‐VBP and cost report data (n = 12 420).Principal FindingsOf the 12 420 SNFs, about 46.4% have a negative profit margin. Furthermore, there is a 14‐percentage point difference in average profit margins for SNFs with positive profit margins vs. SNFs with negative profit margins (6.1% vs −8.15%). About 74.5% of SNFs with negative profit margins and 71.7% of the SNFs with positive profit margins are penalized under SNF‐VBP (P < .05). Among the 9063 SNFs that are penalized, about 47.4% of the SNFs have negative profit margins with an average profit margin of −8.23%. These penalized SNFs with negative profit margins (n = 4295) have an average loss of $24 400 from SNF‐VBP (range: −$4 to −$170 000). In the adjusted analysis, the odds of being penalized under the SNF VBP program for SNFs with negative profit margins are 13% higher vs. SNFs with positive profit margins (OR: 1.13; 95% CI: 1.04‐1.23).ConclusionsSNFs with negative profit margins are more likely to be penalized under the SNF‐VBP.Implications for Policy or PracticeAlthough we want to incentivize quality improvement through programs like SNF‐VBP, we need to ensure that SNFs with negative profit margins have the resources to improve. Facilities with negative profit margins that are penalized under SNF‐VBP have an average loss of $24 400—an amount that roughly approximates average annual salary of a certified nursing assistant, one of the key nursing home direct care staffs. These losses may further exacerbate quality problems in facilities that are already struggling. Alternative approaches to assist financially struggling SNFs may help them improve quality and perform better under SNF‐VBP.

EPC 4.0: The quest for reducing CAPEX in EPC projects

Abstract Engineering, procurement and construction (EPC) business in Europa is increasingly under pressure. Lack of productivity, low or negative profit margins for investors, and the lack of adopting necessary innovations and digitalization—from engineering activities through operations and maintenance to decommissioning—have caused significant deprivation of business and competitiveness compared to emerging providers in Asia. The quest for reducing capital expenditures (CAPEX) in EPC projects is intensifying. In May 2018, a research project was started to analyze the situation and key trends through desk research, to research how the challenges of the business could be tackled and to derive practical guidance for EPC contractors as well as for investors, owners, and operators (O/O). The project aimed to propose innovative ways of improving the EPC business model to reach the next level (“EPC 4.0”). In doing so, lessons learned from the automotive and aviation industry were considered. A key objective of the research project was to challenge statements of international EPC experts to cut CAPEX by 40–50% in EPC projects. With this statement in mind, the research focused on identifying measures with potential in six areas: (1) digitalization, (2) partnering, (3) flat supply chains, (4) flexible organizations, (5) core competences, and (6) the human factor. Summarizing the findings in these areas, the EPC 4.0 project came to a savings potential of up to 50% of the total budgeted project costs.

Performance Scrutiny of Nepal Electricity Authority using DuPont Analysis

The research paper aim to analyze the financial strength and weaknesses of NEA by using DuPont analysis. The descriptive and analytical research designs have been adopted in the research. The quantitative data has been obtained from annual reports of NEA. The study covers eight years period from 2011/12 to 2018/19. The study concludes despite being the sole distributor of the electricity in the country, the financial performance, measured in terms of ROE, of NEA is very poor in first five years (2010/11 – 2015/16) of the study period. The primary source of such poor performance was negative profit margin. Besides, NEA is also exposed to higher financial risk measured in terms of equity multiplier. However, both these measures, ROE and EM have improved in later two years (2016/17 – 2017/18) of the study period.

Socio-Economic Performance of Manufacturing Companies in Urban Ghana

The integration of sustainable development practices including environmental management accounting, environmental performance assessment, social equity, economic efficiency and corporate social performance into the daily management portfolios of business has acted as the catalyst towards the socio-economic performance of businesses. This paper explored the effects of environmental sustainability practices on socio-economic performance of manufacturing companies in urban Ghana. The study involved six manufacturing companies. Using the cross-sectional design with a two-stage sampling technique, 600 respondents were selected from the 6 companies. The hypothetical model was tested using regression analysis, to verify the hypothetical relationships between variables in the study. A 2-tailed test involving Pearson product-moment correlation coefficient was run to ascertain the relationship between ESPs and economic performance of MCs. The results of the study from the model Summary showed R Square of 0.813 indicating that about 81% of the socio-economic performance of manufacturing companies is accounted for by environmental sustainability practices (ESPs). There is a significant negative profit margins in the operational activities of companies (-0.550) at 0.01 due to ESPs in the company. It is concluded that environmental sustainability practices relate to socio-economic performance of manufacturing companies. Keywords: Environmental sustainability practices, environmental accountability, corporate sustainability performance, environmental citizenship, environmental injustice, manufacturing companies, Ghana DOI : 10.7176/EJBM/11-15-09 Publication date :May 31 st 2019

Socio-economic Performance of Manufacturing Companies in Urban Ghana

The integration of sustainable development practices including environmental management accounting, environmental performance assessment, social equity, economic efficiency and corporate social performance into the daily management portfolios of business has acted as the catalyst towards the socio-economic performance of businesses. This paper explored the effects of environmental sustainability practices on socio-economic performance of manufacturing companies in urban Ghana. The study involved six manufacturing companies. Using the cross-sectional design with a two-stage sampling technique, 600 respondents were selected from the 6 companies. The hypothetical model was tested using regression analysis, to verify the hypothetical relationships between variables in the study. A 2-tailed test involving Pearson product-moment correlation coefficient was run to ascertain the relationship between ESPs and economic performance of MCs. The results of the study from the model Summary showed R Square of 0.813 indicating that about 81% of the socio-economic performance of manufacturing companies is accounted for by environmental sustainability practices (ESPs). There is a significant negative profit margins in the operational activities of companies (-0.550) at 0.01 due to ESPs in the company. It is concluded that environmental sustainability practices relate to socio-economic performance of manufacturing companies. Keywords: Environmental sustainability practices, environmental accountability, corporate sustainability performance, environmental citizenship, environmental injustice, manufacturing companies, Ghana DOI : 10.7176/EJBM/11-15-09 Publication date :May 31 st 2019

Competition Issues in India's Online Economy

The world of high technology companies is seen as a dynamic area with a rapid pace of creative destruction. There is, however, a class of industries where there are strong network effects, where the market tends to collapse into a narrow set of players. After one burst of innovation where a new online business is born, there is the possibility of entrenched market power with the extraction of consumer surplus. Many firms, global and Indian, have resorted to the strategy of making large losses by subsidising users, as a way to obtain those network effects. This has created a new class of concerns about predatory pricing, with unprecedented negative profit margins on a sustained basis, being supported by equity capital infusions. In the short run, discounts are popular, but recoupment is inevitable and market power will adversely affect consumers in the future. We argue that the existing competition law regime in India needs to be fine tuned, for technology-enabled markets with significant network effects, to address the possibility of new kinds of abusive conduct. We offer a series of tangible proposals through which the Competition Commission of India can better handle these emerging situations. We also look into the role and responsibilities of the investors who back these online businesses and the impact of their conduct on competition in the underlying markets.

Accentuate the Positive, Eliminate the Negative: Using Constraints to Amplify Factor-Based Indexes

Factor-based indexes tilt toward characteristics that are associated with long-term outperformance, but they are often unable to provide the desired exposures without taking on substantial unintended active risks. The desired factors often carry with them tilts toward particular countries, industries, risk factors, and companies. This problem comes from the relative simplicity of the index construction rules. Although simplicity and transparency are good attributes, for most indexes, there exists no mechanism to control unintended risks. For example, when the value factor is targeted, the portfolio tends to overweight less profitable companies. An investor who wants exposure to inexpensive stocks may receive a portfolio of companies with low or negative profit margins and with concentrations in the sectors and countries that currently happen to have more companies with a lower valuation. In this article, we apply constraints to several factor strategies with an eye toward managing these unintended exposures. We find that constraints reduce the noise and amplify the signal of factor-based strategies. <b>TOPICS:</b>Factor-based models, exchange-traded funds and applications, risk management

ANALYSIS AND CONTROL OF GOVERNMENT SUBSIDIES FOR INVESTMENTS IN AGRICULTURE OF THE RUSSIAN FEDERATION

Subsidies are an important part of development of agriculture in Russia. The vast majority of agricultural holdings have negative profit margin without government support. Comparing an amount of government support in Poland and in Russia, it was equal to 76.21 m PLN for 1,000 km2 of agricultural land in Poland versus 6.35 m PLN in Russia in 2014. Such situation leads to low productiveness of agriculture in Russia. As Russian agriculture is extensive, the Government has made a decision to assign about 40% of the support amount to recover rate of investment loans intended for development of material and technical facilities of agriculture. This program is not popular and it involves 3.55% of the total number of agricultural holdings only. In order to estimate efficiency of utilization of subsidies a cluster analysis was made by means of K-mean method. It revealed 3 clusters depending on efficiency of subsidies utilization. Some control procedures are suggested to manage efficiency of utilization of government support.

Economic burden of clinical trials in lung cancer in a German Comprehensive Cancer Center

ObjectivesThe recent success of individualized lung cancer therapy has triggered fundamental changes in clinical research strategies. To date there is a strong focus on early proof of concept trials in genetically preselected small patient subgroups. This analysis focuses on the economic burden caused by such trials for advanced lung cancer patients in a German Comprehensive Cancer Center (CCC). MethodsThe profit margins between recruiting groups with ≤3 and >3 patients were compared. Clinical and economic data from clinical trials for advanced lung cancer (LC), pharma-sponsored trials (PhST) as well as investigator initiated trials (IIT), conducted between 2011 and 2015 at the Center for Integrated Oncology (CIO) Cologne, were analyzed using a profit-center calculation model. Results161 patients were enrolled in 27 clinical trials. The key economic parameter determining costs and payments was the ‘trial visits’. In comparison of the two groups (A≤3; B>3 patients enrolled) we found negative profit margins for the low recruiting group (€ −1444). Concerning the number of visits significant differences were found between PhST and IIT (p=0.009). Additionally, sub-analysis show structural differences in cost composition by conducting PhST and IIT. ConclusionTrials with low patient numbers and IIT, do not cover the cost. To ensure adequate, cost-covering compensation by pharmaceutical companies CCCs have to thoroughly calculate the cost of early proof of concept trials. The findings of this study also underline the need for novel structures in public funding for investigator-initiated clinical trials in precision medicine.

Expanding the dairy herd in pasture-based systems: The role of sexed semen within alternative breeding strategies

A simulation model was developed to determine the effects of sexed semen use in heifers and lactating cows on replacement heifer numbers and rate of herd expansion in a seasonal dairy production system. Five separate artificial insemination (AI) protocols were established according to the type of semen used: (1) conventional frozen-thawed semen (CONV); (2) sexed semen in heifers and conventional semen used in cows (SS-HEIFER); (3) sexed semen in heifers and a targeted group of cows (body condition score ≥3 and calved ≥63 d), with conventional semen used in the remainder of cows (SS-CONV); (4) sexed semen in heifers and a targeted group of cows, with conventional semen in the remainder of cows for the first AI and conventional beef semen used for the second AI (SS-BEEF); or (5) sexed semen in heifers and a targeted group of cows, with conventional semen in the remainder of cows for the first AI and short gestation length semen used for the second AI (SS-SGL). Each AI protocol was assessed under 3 scenarios of sexed semen conception rate (SS-CR): 100, 94, and 87% relative to that of conventional semen. Artificial insemination was used on heifers for the first 3 wk and on cows for the first 6 wk of the 12-wk breeding season. The initial herd size was 100 cows, and all available replacement heifers were retained to facilitate herd expansion, up to a maximum herd size of 300 cows. Once maximum herd size was reached, all excess heifer calves were sold at 1 mo old. All capital expenditure associated with expansion was financed with a 15-yr loan. Each AI protocol was evaluated in terms of annual farm profit, annual cash flow, and total discounted net profit. The SS-CONV protocol generated more replacement heifers than all other AI protocols, facilitating faster expansion, and reached maximum herd size in yr 9, 9, and 10 for 100, 94, and 87% SS-CR, respectively. All AI protocols, except SS-BEEF and SS-SGL at 87% SS-CR, reached maximum herd size within the 15-yr period. Negative profit margins were experienced for SS-CONV in the first 5, 4, and 3 yr of expansion for 100, 94, and 87% SS-CR, respectively. Total discounted net profit was greater in all sexed semen AI protocols compared with CONV. This study demonstrated that, for each SS-CR, the greatest rate of expansion is achieved when using sexed and conventional semen (SS-CONV). The combined use of sexed semen and beef (SS-BEEF) or SGL (SS-SGL) semen resulted in greater discounted net profit at 100, 94, and 87% SS-CR compared with CONV, but a similar net worth change at 87% SS-CR due to a lower inventory change because SS-BEEF and SS-SGL reached maximum herd size within 15 yr.

Ist die Mammabiopsie ausreichend finanziert? Eine Prozesskosten & Erlösbetrachtung

The objective of the study was to determine whether the various breast biopsy procedures specified in the S 3 guidelines are sensibly represented within the current German health system as considered from a cost evaluation perspective. This prospectively designed multicenter study analyzed 221 breast biopsies at 7 institutions from 04/2006 to 01/2007. Core needle biopsies, vacuum-assisted biopsies and surgical open biopsies under sonographic or mammographic guidance were evaluated. During an analysis of process costs, the individual process steps were recorded in diagrammatic form and assigned to the true consumption of resources. The actual resource consumption costs were entered. A process-related breakeven analysis was conducted to check whether the reimbursement of individual biopsy types covers the costs. Only sonographically guided core needle biopsy and surgical open biopsy are adequately reimbursed in the current German health system. All other breast biopsies indicate a negative profit margin. The principal reasons for under-funding are found in the area of reimbursement of investment and non-personnel costs. The reimbursement of breast biopsies must be improved in order to guarantee nationwide care of the population using the breast biopsy methods recommended in the S 3 guidelines and to avoid disincentives with respect to breast biopsy indications.

Understanding the risk factors of trauma center closures: do financial pressure and community characteristics matter?

We analyze whether hazard rates of shutting down trauma centers are higher due to financial pressures or in areas with vulnerable populations (such as minorities or the poor). This is a retrospective study of all hospitals with trauma center services in urban areas in the continental US between 1990 and 2005, identified from the American Hospital Association Annual Surveys. These data were linked with Medicare cost reports, and supplemented with other sources, including the Area Resource File. We analyze the hazard rates of trauma center closures among several dimensions of risk factors using discrete-time proportional hazard models. The number of trauma center closures increased from 1990 to 2005, with a total of 339 during this period. The hazard rate of closing trauma centers in hospitals with a negative profit margin is 1.38 times higher than those hospitals without the negative profit margin (P < 0.01). Hospitals receiving more generous Medicare reimbursements face a lower hazard of shutting down trauma centers (ratio: 0.58, P < 0.01) than those receiving below average reimbursement. Hospitals in areas with higher health maintenance organizations penetration face a higher hazard of trauma center closure (ratio: 2.06, P < 0.01). Finally, hospitals in areas with higher shares of minorities face a higher risk of trauma center closure (ratio: 1.69, P < 0.01). Medicaid load and uninsured populations, however, are not risk factors for higher rates of closure after we control for other financial and community characteristics. Our findings give an indication on how the current proposals to cut public spending could exacerbate the trauma closure particularly among areas with high shares of minorities. In addition, given the negative effect of health maintenance organizations on trauma center survival, the growth of Medicaid managed care population should be monitored. Finally, high shares of Medicaid or uninsurance by themselves are not independent risk factors for higher closure as long as financial pressures are mitigated. Targeted policy interventions and further research on the causes, are needed to address these systems-level disparities.

Incremental Costs of Post–Liver Transplantation Complications

Complications after liver transplantation are common and expensive. The incremental costs of adult posttransplantation liver transplantation complications and who pays for these complications (center or payor) is unknown. We reviewed the medical and financial records (first 90 postoperative days) of all adult liver transplant recipients at our center between July 1, 2002, and October 30, 2005 (N = 214). The association of donor, recipient, and financial data points (total costs, reimbursements, and profits) was assessed using standard univariable analyses. The incremental costs of complications were determined with multiple linear regression models to control for the costs inherent to donor and recipient characteristics. Univariate analyses demonstrated that both total hospital costs and reimbursements were substantially increased in patients with several different complications. Multiple linear regression analysis, controlling for recipient (age, gender, race, and laboratory Model for End-Stage Liver Disease [MELD]) and donor factors (donor risk index), noted that increased hospital costs and hospital reimbursements were independently associated with laboratory MELD (incremental costs of $3,368 and $2,787, respectively, per MELD point) and pneumonia ($83,718 and $68,214, respectively). A negative profit margin for the medical center was independently associated with peritonitis ($21,760). Commercial insurance was associated with no changes in total costs when compared with public insurer, but it was associated with decreased reimbursement and profit. The incremental costs of complications in liver transplantation are high for both the medical center and payor, but medical center profits are not affected substantially. The payor bears the financial burden for post-liver transplantation complications.

Capital structure and profitability of the property and construction sectors in Hong Kong

This paper examines the inter‐relationship between profitability, cost of capital and capital structure among property developers and contractors in Hong Kong. Whilst major indigenous local developers are among the largest and the most profitable in the world, their contractor counterparts are generally small and nowhere near as profitable. An analysis of financial data suggests that gearing is generally higher among contractors than developers. However, it does not mean that contractors borrow more than developers. Indeed they do not need to borrow as much as developers even if they have the assets to pledge as collateral. Contractors do not have to pay for high land costs, and they obtain project finance from developers through interim payments in lump sum contracts that are widely adopted in the industry. Their high gearing reflects more their low equity base than high level of debts. Their costs of equities are about double the developers’, probably due to their usually low or negative profit margins. This conclusion is substantiated by further regression analysis of the data. The findings indicate that capital gearing is positively related with asset but negatively with profit margins. This article concludes with a discussion on implications of such profitability divide between the two sectors on the unequal relationship between developers and contractors, and on their competitiveness.