Determinants of profitability: The case of indian public sector power industries

This paper presents a basic model of a multiple regression of profitability using return on total assets and profits margin to sale ratio as the indicators of profitability. Based on this model a study was made of a sample of power sector units and the result of the study is presented here. Actually profitability is highly sensitive economic variable which is affected by a host of factors operating through a variety of ways. Some of them affect product prices and quantities; some affect the cost of production while others make changes in capital stock, size, market share and growth of the firm. Further, corporate policy relating to various functions will affect profitability. Some of them are relevant in short run while others have impact in the long run. It is difficidt to build a theory of profitability which accounts for all such factors. Because of these difficulties, it is quite natural to analyze the variation in profitability by taking the partial approach, i.e., to find the effect of certain major variables, ignoring the implications of other left out independent variables at a time. The present study is a step towards this direction.