Power of Profit: Business and Economic Analyses, Forecasting, and Stock Valuation
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How do business leaders make important capital investment decisions? How do Wall Street analysts track market fluctuations? How do regulators establish policies to maximize national output? In The Power of Profit, Anari and Kolari demonstrate how profit measures can be applied as the basis for these and many other applications of economic, policy, financial, and business analysis. The underlying theme of the book is that profitability is the driving force in advanced capitalist economies. Firms invest in capital, produce goods and services, and generate sales in an effort to reap profits. Firms that are unprofitable exit the marketplace and are replaced by other successful firms that earn profits. Despite the crucial importance of profits to business firms, however, there is no formal model that directly relates profits to capital formation and output. Previous studies over the past 100 years on profit and the economy are mainly descriptive in nature without any well-specified model grounded in microeconomic theory. Filling this gap, the authors present a profit-based model of the firm, grounded in the well-known Cobb-Douglas production function, and that can be applied to individual firms, industries, and the business sector as a whole. The book will be enhanced by on-line data sets, case examples, and additional resources. Ultimately, the principles of the profit-based model can be integrated into research and analysis in related fields, including economics and economic policy, finance, accounting, marketing, and strategy. Springer Science+Business Media, LLC 2010. All rights reserved.
