Equity and Rate of Return: Are Small Manufacturing Firms Handicapped by Their Own Success?

What is it about?

French small manufacturing firms are defined as companies with less than 500 employees and more than 20. This excludes companies in their start-up phase and companies with less than 20 employees. This paper aims to show that the terms of the debate on the capitalization of small manufacturing firms ought to be clarified. Small manufacturing firms are often said to be undercapitalized, because in relative terms their capital spending is often similar, or even greater, than that of their larger competitors. This means that their earnings are depleted by the higher depreciation charges for maintaining their fixed assets. Undercapitalization is also due to the fact that firms in this category have poor access to capital markets. Thus they have greater financing requirements.

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