STUDY OF UNPROFITABILITY OF UKRAINE’S LARGE CONSTRUCTION ENTERPRISES BY THE DUPONT METHOD

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  Katerina Izmailova

  Yuliia Zapiechna

Abstract

Profitability and its varieties remain the key indicator, which helps to explore certain dependencies and consequences of economic activity of each enterprise in the country. The authors study large construction companies in Ukraine to identify general trends in the construction sector. Despite their overall small share in the total number of all construction enterprises, one should note their significant contribution to the development of the construction sector of Ukraine and higher profitability compared to small and medium enterprises. The negative trend of large construction companies during 2010-2020 proves the relevance of a detailed analysis of such an indicator as the loss ratio of equity in order to identify the factors that have the greatest negative impact. Method. The authors analyse the impact of operating, investment and financial activities on the loss of equity of Ukrainian large construction companies in 2018 compared to 2013 by the widely known method of the company DuPont. It is based on an equation that shows the relationship between return on invested capital, asset turnover, net income and financial leverage. Only in 2018 the situation started to level off. Factor analysis of profitability indicators has revealed the in-depth factors that affect them, namely: loss of the main activity of construction enterprises for ten consecutive years, which caused a decrease in equity to a critically low level and, accordingly, high values of financial leverage. Results. The use of the DuPont method for the analysis of profitability (loss) for large construction companies has allowed a deeper analysis of the factors that influenced such indicators as return on equity. It has been found that the profitability (loss) of equity industries are influenced by the rate of business activity and financial dependence of large construction companies. Practical significance. It has been found that the loss of equity is influenced by a decrease in uncovered profits and a decrease in financial dependence (the ratio of financial dependence increased from 34.96 in 2013 to – 19.213 in 2018) of large construction companies. This indicates a gradual erosion of equity of construction companies, increasing the level of risk, reducing their financial stability. Additional measures are needed to revive the general economic situation in the country, including the digital transformation of construction, the search for innovative activities, the restructuring of institutional support for the construction sector.

How to Cite

Izmailova, K., & Zapiechna, Y. (2020). STUDY OF UNPROFITABILITY OF UKRAINE’S LARGE CONSTRUCTION ENTERPRISES BY THE DUPONT METHOD. Three Seas Economic Journal, 1(4), 84-89. https://doi.org/10.30525/2661-5150/2020-4-12
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Keywords

large construction enterprises, DuPont method, return on equity, profitability of production activity, asset turnover, financial leverage

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