A study on profit: Man vs. machine the profitability of capital-intensive and labor-intensive firms in the industrial sector of the Philippine stock exchange from 2008 to 2012

The method of production an enterprise chooses to invest on, whether capital-intensive or labor-intensive, will have an impact on the overall profitability of the business. As a result, incorporators and the management find it difficult to decide whether to invest on more capital assets or more employees, workers, and laborers to produce the goods and services offered by the firm. To help investors with this dilemma, the researchers have made a comparative analysis on the profitability between labor-intensive and capital-intensive firms listed under the industrial sector of the Philippine Stock Exchange from 2008-2012.The first phase of the research involves performing a multiple regression analysis to determine if there is a relationship between the independent variables (total assets, net fixed assets and total number of employees)and the dependent variables (operating expense ratio, cost of goods sold ratio, earnings before interest and taxes to sales ratio, earnings before interest, taxes, depreciation, and amortization to sales ratio, return on equity, gross profit margin, net profit margin and return on assets). The second phase determines which companies under the industrial sector are capital-intensive and labor-intensive. The last phase involves comparing the average ratios of the various profitability measures and determining which method of production is more profitable.The results suggest that the independent and dependent variables do not have any relationship at all. Furthermore, six out of the eight selected ratios of profitability were in favor to labor-intensive companies thereby suggesting that labor intensive firms are more profitable than capital-intensive companies.