However, looking at the Flow of Funds report, a different measure comes up. Retained corporate profits came in at $731 billion dollars in 4Q 2006. That number is $499 billion with capital consumption adjustments. That's one of the primary ways that companies are fueling all of the merger and acquisition in the market right now.
Take a look at this chart from the St. Louis Fed of corporate profits with inventory adjustments. In short, companies are doing very well.
Here's the year over year change in corporate profits.
There's a ton of liquidity in the market right now.
