ABSTRACT
Taking the period 1947-1955, to begin with, profits per unit of output rose a good deal, and their rise outstripped that in profits on turnover. For all the firms taken together, retained earnings were a larger source of funds than depreciation allowances and a far larger source than funds rose on the capital market. Additions to reserves, together with increases in the credit received from trade creditors and the tax authorities, were by far the most important sources of funds. Several commentators, in remarking on the considerable fluctuations in profits during 1955–1957 period, have attributed them to the heavy burden of fixed costs in the industry. In common with industry in general, the motor industry distributed a high proportion of its net earnings as dividends before the war. The experience of the Ford Motor Company will be discussed in an attempt to focus attention on the problems involved in analysing short-run profit changes.
