In article 4, we analyzed direction and magnitude of profit margin (defined as operating income divided by revenue) from one year to the next for individual firms in the Am Law 100 using a short-term oriented framework. Here, we analyze profit margin behavior over longer time frames i.e. over multiple future years.
To do so, we return to the formula expressing profit margins for any future year, T years from this current year 0, in terms of current RPL and CPL, as also their cumulative average annual growth rate % (CAGR).
