S. Korean firms reluctant to spend capital amid economic slump

SEOUL, Nov. 26 (Yonhap) -- South Korean companies affiliated with the country's top 10 business groups have retained earnings and capital surplus almost eight times their equity capital, pointing to their unwillingness to invest, a trade association said Wednesday.

The average reserve ratio of 64 listed firms affiliated with Samsung, LG, SK and
other business groups stood at 787.13 percent at the end of September, up 67
percentage points from the end of last year, according to the Korea Listed
Companies Association (KLCA).
The rise in the ratio, calculated by dividing retained earnings and capital
surpluses by paid-in capital, indicates that the companies, which racked up their
profits in the first half, remained cautious about capital spending, the
association said.
Retained earnings refer to profits that are left over after being distributed to
shareholders, while capital surplus is the amount that the corporation received
in excess of the stock's par value.
A higher reserve ratio usually means that a company's capital structure is
relatively stable so the firm has sufficient money to spend, for example, on
business expansion.
By company, Tae Kwang Industry Co. had the biggest reserve ratio of 27,666
percent, followed by SK Telecom with 27,110 percent, Lotte Chilsung with 11,670
percent and Lotte Confectionery with 20,534 percent.