Monetary Circulation
The Federation of Korean Industries (FKI) announced on Sept. 30 that about 1,300 listed Korean companies invested 131.3 trillion won (US$111.2 billion) in tangible, intangible and leased assets last year. The same companies earned 99.2 trillion won (US$84.0 billion) in operating profits and recorded an operating profit-to-sales ratio of 5.2 percent, along with an investment-to-sales ratio of 6.9 percent.
Their operating profits have continued to decline for six years due to adverse economic conditions, but they maintained an annual investment of approximately 130 trillion won (US$110 billion) during the same period.
In the meantime, their internal reserves increased from 438.2 trillion won (US$371.2 billion) to 855.3 trillion won (US$724.3 billion) between 2009 and 2014, while the rate of year-on-year increase fell from a peak of 25.9 percent to 8.5 percent between 2010 and last year. Internal reserves can be defined as a company’s operating profits left after dividends are paid, which tends to depend on factors such as operating profits.
“These days, Korean companies’ internal reserves are increasing at a slower pace than before with their profitability on the decline,” the FKI explained, adding, “Nevertheless, they are maintaining the level of about 130 trillion won [US$110 billion] in annual investment, even though the growth rate of the Korean economy as a whole dropped from 6.5 percent to 3.3 percent from 2010 to 2014.”